Evening out an online advantage


Photographer- Randall Barnes
Reporter- Briana Conner

PADUCAH, Ky.-—Some brick-and-mortar store owners say sales tax loopholes for online retailers are bad for business. "The question is, is it fair? Of course, we don't think it is," said Marilyn Cassity. She owns Cassity's in downtown Paducah.

The latest battle in the fight for "marketplace fairness" has failed. The Supreme Court decided not to consider a case that could have given states the option to make online and physical stores play by the same tax rules. Monday, Illinois Senator Dick Durbin released a statement that reads, "This decision further illustrates why a national solution is needed to level the playing for local brick-and-mortar retailers and help them compete more effectively against out-of-state internet sellers."

Right now, online retailers only charge sales and use taxes to customers who live in the same state where their business is located. That means out of state customers often get an automatic discount. That, coupled with Cyber Monday deals and free shipping offers, is driving bargain hunters to the web. Online sales in the U.S. are expected to hit two billion dollars. As of 11:00 this Cyber Monday morning, online sales were up more than 20 percent according to IBM. Some small business owners support changing tax codes, but that may be easier said than done.

Even on a day dedicated to digital deals, Cassity said, "We had several people in. I've got nine gifts to wrap this afternoon." The gifts were picked out in person at Cassity's Lady's Boutique. "Most of our customers come in the store. They want to see who they're spending their money with, and they want to see the goods they're buying," she said. That's an advantage Cassity said people can't get online, though they can save on taxes by shopping out of state. "That is when the loopholes come into place," said staff accountant Leah Inman.

Inman said people are supposed to pay sales taxes in the state they live in for online purchases, though they rarely do. Cassity said, "I don't know that that's all that fair." The changes that would make online retailers charge sales and use taxes are complicated. Inman said, "It could become a nuisance... setting the program up and getting all of the numbers."

Cassity offered up a different idea. "Maybe we should have a lot of tax free days and offer them to our people and see how that works." She said it's a suggestion to keep small stores viable. "We still believe there's a place for brick-and-mortar stores," said Cassity. In her case, she's owned the same spot for 15 years. She said she hopes to keep it for 15 more.

Small catalog and online retailers are lobbying against The Marketplace Fairness Act. The legislation is still pending in Congress.