Sales tax loophole riles Michigan businesses
By HAYLEY OUTSLAY
Capital News Service
LANSING—Online shopping has revolutionized the retail industry as an alternative to waiting in line and searching through shelves for specific merchandise.
However, as online shopping increases in popularity, the unresolved issue of collecting sales tax gains momentum as well.
Larry Meyer, chief executive officer of the Michigan Retailers Association (MRA), recognizes that while online shopping has positive impacts on the economy, negative impacts on the state and retailers also exist.
Current law requires Michigan citizens who order merchandise from Michigan-based companies must pay sales tax. But if they order from an out-of-state store there is no sales tax collected unless voluntarily added by the seller.
The Michigan Department of Treasury estimates $270 million is lost each year due to unpaid sales tax on Internet, telephone and catalog out-of-state sales. It says Internet sales account for less than half the total.
Meyer said it’s unfair that goods shipped to Michigan residents who should be taxed in the state are not, regardless of whether they were purchased in a store or delivered.
“The federal government must impose legislation to enable (collection of the) sales tax,” he said, adding that the state is waiting to see if Congress will pass such a mandate.
However, Meyer said online shopping is “a part of our commercial enterprise,” adding that the MRA “certainly encourages entrepreneurial companies such as Getz’s to be involved in an Internet sales channel.”
Getz Department Store in Marquette saw its business boom when the family-owned store went e-global in 1997.
“On a monthly basis we have 4,000 to 5,000 people looking at the site,” John Spigarelli, Getz director of e-commerce operations, said.
Its most popular merchandise is Carhartt Clothing, a brand of work wear geared toward carpenters and construction workers, he said.
Other big sellers include Northface, Marmot and Filson, which are premium brands of outdoor clothing for men, women and children.
While Spigarelli said the actual store remains extremely popular locally, its online store has more customers and sells more than its brick-and-mortar location.
“We have gained and gathered customers, created jobs and put hundreds of thousands of dollars back into the community because of business from other states,” he said
But Spigarelli also said that the sales tax encourages companies to move to other states that do not require sales tax on shipped items, and in this way competitors are gaining an advantage.
He said he wants to see successful companies open and stay in Michigan.
“Ten years ago no one would ever think that a small business in New York City would effect a small business in Marquette, Michigan,” Spigarelli said, “Now everything is a click away and it’s like 50 shops all lined up on one street.”
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© 2007, Capital News Service, Michigan State University School of Journalism