Dec. 9/16 2013; Volume 27/number 16
Anaheim, Calif.—The Senate-passed Marketplace Fairness Act sits idle in the House, unlikely to see any legislative action until first-quarter 2014 at the earliest. Undaunted, World Floor Covering Association (WFCA) CEO Scott Humphrey remains resolute in his push to win Congressional approval for the Marketplace Fairness Act, which he said would level the playing field for brick-and-mortar flooring retailers who pay sales tax while online retailers in 34 states do not. Humphrey said he and WFCA lobbyists recently met with 14 Congressmen as well as the staff of Rep. Bob Goodlatte (R-Va.), the chairman of the House Judiciary Committee.
It is Goodlatte’s committee that decides whether to take up the measure. According to Humphrey, the first step in this legislative process would most likely be a hearing on Capitol Hill to debate the act. It could then be voted on by the full House or remain dormant. “If a vote took place, we feel it would be a close one,” Humphrey said.
In what amounted to a minor victory for the WFCA, the U.S. Supreme Court refused to get involved in the online retailers’ fight to keep their customers from having to pay state sales tax in New York. That decision means New York’s online sales tax will stand.
The WFCA’s position is such that without the Marketplace Fairness Act, brick-and-mortar flooring dealers would continue to be at a significant disadvantage compared with those online retailers who do not pay state sales tax.
Among the largest online retailers, Wal-Mart and Amazon are for the measure; eBay is against it.
At issue for many Republicans, including those from the anti-tax Tea Party wing, is the notion that the Marketplace Fairness Act amounts to another tax. “When explained to them, every Republican we met with admitted it isn’t a tax,” Humphrey said.
WFCA has tried to persuade lawmakers by explaining the human toll on independent dealers. “You should see the looks on their faces when we tell them how many retailers have gone out of business. It is said that if you put a face to the issue it can really sway a Congressman.”
According to Humphrey’s data, there are 25% fewer independent dealers around today than there were seven years ago. What is unknown is to what extent online sales have negatively impacted physical stores during that period when factoring in the tax discrepancy. Anecdotally, Humphrey said WFCA dealers have reported an increase in showrooming, the practice of consumers examining merchandise in a traditional brick-and-mortar retail store without purchasing it, then shopping online for a lower price, or no tax, for the same item.
“In California, where some sales tax rates are 13%, that can be a significant amount of money for a consumer when she is spending $5,000,” Humphrey said. “If Wal-Mart and Amazon get hurt with this, they will still be in business. But the mom and pop is going to be the one that gets hurt. If we don’t do something our business will be forever changed.”