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Opinion: Level Playing Field Crucial for Columbus Retailers

Jayson Waits Jayson Waits Opinion: Level Playing Field Crucial for Columbus RetailersPhoto by Sally Wenxin Xia.
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Readers of Columbus Underground are well aware of all the fantastic development occurring across the city. It is an exciting time to be a resident and a business owner. That said, an unfair government policy is holding back local retailers from growing and jeopardizes future development in the city.

As a small business owner myself and manager of a large networking group, the Success Group Business Network, I know that one of the largest hurdles facing the industry is an uneven playing field with online-only businesses.

Unlike our brick and mortar stores,online-only retailers like Overstock.com do not collect sales tax. This puts us at a significant competitive disadvantage; in Franklin County the price difference amounts to 7.5%. This margin can mean the difference between making a sale or losing a customer to online competitors and between adding new locations or boarding up shop.

What’s worse, often times consumers will try out a product and solicit expert advice in a brick-and-mortar store only to purchase it online to save the sales tax. The small business fronts the cost of acting as a showroom by paying staff, renting the space, and displaying product, but never sees any return on that investment when people buy products online. Stores selling high-end products such as jewelry stores and electronics retailers are frequent victims of this scenario.

This tax loophole stems from a 1992 Supreme Court decision, when the internet was in its infancy, that allows online retailers to only collect sales tax where they have a physical presence. So, for a state like Ohio which does not have an abundance of online retailers – consumers are able to purchase items sales tax free. While that may seem like a great deal for consumers, it has serious negative consequences on our Main retailers.

Retailers are the cornerstones of their local communities and make for vibrant neighborhoods. Just think of Columbus’ most active districts; High Street in the Short North, the North Market, and the commercial areas that make up the hearts of our suburbs. All of them are anchored by small businesses who are community partners.

Conversely, we’ve seen what happens when retail leaves an area. The old City Center Mall is a prime example. When City Center opened it was the gem of the city, but soon faced competition not from retailers online, but from other newer retail complexes in other parts of the city. As retailers left City Center, the mall became a haven for criminal activity, drug dealing and gangs. The mall grew to be such an eyesore that it was eventually purchased by the City and redeveloped into Columbus Commons. Likewise, shops go out of business across the city these days because of unfair online competition.

Mixed use development has become particularly en vogue over recent years, where retail establishments anchor the first floors of commercial space and residential living is housed above. It makes sense — people enjoy living where they work and shop. Yet, if traditional brick and mortar retail stores cannot thrive, its unlikely that we’ll see continued dynamic mixed-use projects in the city.

Retailers are already in a tough spot. A study in the Wall Street Journal highlighted how foot traffic into retail stores during the last holiday season was only half it was just three years ago. A large part of that was due to online competition.

We need to be encouraging our local stores, not giving out-of-state businesses an unfair advantage via a tax loophole. To be clear, our issue is not with online retailers themselves. It is with the unfair sales tax policies that gives online stores an advantage. Brick and mortar retailers just want everyone to play by the same rules.

Congress can fix this inequity. There is legislation pending in Washington that would make the tax burden equal for online retailers and brick and mortar stores. The state of Ohio has even said that when Congress acts, it is ready to enforce the law and will use any new revenue to lower personal income taxes. It’s a smart plan that would restore fairness in the market, but would still keep money in consumers’ wallets.

If as a community we agree that we want to see more development, stronger communities, and local businesses, than we should support closing the online sales tax loophole. E-fairness will not only help our Main Street businesses, but the entire Columbus region as well.

Jayson Waits is the Owner of Bloomtastic Florists in Upper Arlington and sits on the National Advisory Board of the Alliance for Main Street Fairness, a national coalition of small businesses supporting e-fairness.

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  • heresthecasey

    “As retailers left City Center, the mall became a haven for criminal activity, drug dealing and gangs.”

    This is a patently false, inflammatory, incorrect, and ignorant statement – which does nothing but distract from your arguments for an internet sales tax.

    • I believe there was one shooting (IIRC) incident and it left a crime perception issue on City Center for years to come. So while the crime problem may not have been a real threat, the perception was certainly an issue when trying to draw suburban shoppers en masse.

      Personally, I think the opening of Tuttle (1997), Easton (1999) and Polaris (2001) led to City Center’s rapid decline and demise more than anything else. Online sales were on the rise throughout the first decade of the 2000s, but there were three malls thriving and one declining, which means that other brick-and-mortar shopping centers were able to grow during that time, and continue to do so even today.

      It’s also worth noting that shopping centers are largely made up of national retailers and not local/independent small businesses. Not exactly apples-to-oranges in what the author is describing.

      Regardless of all of that, I do agree that online retailers have an advantage over traditional retailers. Which gives all the more reason for small business brick-and-mortars to have their own methods of e-commerce and to create more of an experiential physical store presence (HOMAGE is a good example of both of these things being done correctly) to continue to drive foot traffic in the door.

  • Columbusrules

    Also, online purchases create tax cheaters among almost every Ohioan, because legally residents of Ohio are required to submit “Use Tax” for items purchased online where no sales tax was collected. (Line 19 on Ohio 1040…) To help us all pay our fair share, we need Congress to act.

    Also, instead of cutting the state income tax (benefiting primarily wealthy individuals), Ohio could use the money to 1. restore cuts to local communities and schools OR 2. cut the states sales tax rate (broaden the base, lower the rate). OR 3. Reduce property taxes by restoring the property tax rollback :D The last two would help small businesses much more than a personal income tax rate reduction AND help consumers more than an income tax cut.

  • Mister MooCow

    Instead of lobbying for an increase in bureaucracy and more Federal laws– why not pursue the opposite: elimination of retail sales taxes in Ohio. Sales taxes are regressive and they require small businesses to do extra work that could be better spent on other efforts. Plus, by eliminating sales taxes here, Ohio businesses would gain an advantage over those in neighboring states.

  • Market forces and technology will only be allowed to go but so far. Online shopping is convenient, but most people still want to experience traditional retail. Eventually online sales will be forced to collect sales tax due to revenue pressures. Maybe small business willing to open in target areas could be exempt from collecting sales tax (like a tax abatement) for a certain length of time?
    Filling retail gaps is where small business can really make an impact – especially downtown. It’s ironic that there seemed to be more retail downtown when there was fewer people living there. Now with all the new housing units, it’s difficult to buy certain everyday items within a short walk.

    People laugh at me when I say it, but my test for a downtowns vitality is weather or not you can buy toys. A kid friendly downtown suggest that a wide range of services and goods are available.
    Downtown Columbus has failed that test for at least the last 10 years. As residential increases downtown, hopefully more small retailers will line Broad and High Streets like they did in the ’70s and ’80s. They must offer something the malls don’t.

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