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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