Broomfield E-Commerce Guru Travels To DC To Lobby For Local Taxes

BROOMFIELD, CO -- One of Colorado's top e-commerce sellers has one message for Congress regarding taxing internet purchases: Get it over with.

Over 10 years, Broomfield's Brian Fricano and his family have built online company Sustainable Supply from a single computer in the kids' playroom to a $20-million-a-year operation that employs 20 people in two states. The company sells more than 1 million products from large public restroom partition walls to plastic hard hats to tiny fasteners and screws.

As one of eBay's top sellers, Fricano traveled to Washington DC last week with other online merchants to visit Capitol Hill and explain how internet sales tax can affect smaller e-commerce businesses.

Local sales taxes have been on the e-commerce horizon forever, ever since Amazon was able to get a leg up on the "retail apocalypse" by dodging sales taxes for many years, Fricano said. All eyes are now on the U.S. Supreme Court's docket where a battle over local sales tax between Wayfair and state of South Dakota will be decided soon.

"We believe the states are missing out on revenue, and we’re happy to do our parts," Fricano said.

Some of the politicians the eBay Seller Advocacy gang spoke to are opposed to any new taxes, such as GOP Congressman Andy Biggs of Arizona, Fricano said.

But Fricano and others believe some kind of national sales tax structure would be better for small e-commerce businesses than possibly having to handle individual taxing demands from up to 12,000 local taxing authorities depending on where a product is shipped, he said. Even tech solutions that offer to calculate local sales taxes would charge about three-percent per order, he said, which would kill profitability for e-commerce businesses like his own, which often operates on as low as a five-percent profit margin.

Fricano's company pays sales taxes based on Colorado's "nexus" law for on items sold in states where a company has a physical store, which is the case for many internet small businesses.

Meeting with Boulder Democrat Congressman Jared Polis was productive because Polis himself formerly was the chief of an internet business, Fricano said. But, of course, Polis is running for Colorado Governor and won't be voting on any national legislation after November, which is when Fricano believes this issue may be taken up by Congress. Politicians in on Capitol Hill are older, especially in the Senate. Many have spent their whole careers as politicians and don't understand how business works, he said. As was seen during Facebook CEO Mark Zuckerberg's testimony, some aren't even clear how the Internet works, Fricano joked.

Ideally, e-commerce sellers think there should be some kind of exemption for small businesses not to penalize "the lady selling silks out of her garage," and to build the internet economy that can create jobs, Fricano said.

"I'm glad we got the opportunity to shed some light into how this legislation could affect our businesses. We got to pitch them on behalf of the millions of online retailers that don’t have a voice there."

E-Commerce today

Sustainable Supply was created in 2009 when Fricano's family decided to try to create supplemental income so that his wife, who had just given birth to their second child, could stay home to take care of the kids, the company bio says. "[Fricano] soon had to recruit his recently retired parents to answer phones and process invoices. Within two short years, plans changed as the company quickly ascended to become one of the nation’s fastest-growing, posting a three-year growth rate of over 500%."

As an early adopter in the online business-to-business firm space, Fricano said things have gotten both better and worse for someone wanting to start their own internet business.

"The power of the Internet is still very much alive today," he said. "I see so much opportunity for people to get into online retail since we started in 2009." The cost of technology has dropped and there is a "wealth of information and the opportunity to learn so much." E-commerce can have very low initial investment costs and can allow companies to experiment with products.

Online companies also know that business-to-business online commerce still has lots of space to grow, as younger people begin to take over procurement roles, replacing retiring Baby Boomers who valued face-to-face interaction with local salespeople, Fricano said.

"Where buying supplies for your company formerly was very relationship-driven, a younger person with a 15-second Google search can yield maybe a 15-percent savings," he said.

The threat for his business and for others starts with a giant "A." Like Amazon did with brick and mortar retail, the company is aggressively getting into the business-to-business market by going after procurement deals.

"If I’m selling the heck out of this super widget, I never have to worry about eBay to compete with me," Fricano said. "But you have to create a unique strategy for selling on Amazon to protect against their 'secret sauce' [algorhythm]. The last place you want to get in a pricing war is with Amazon on their platform."

Amazon's free shipping with Amazon Prime has also affected customer expectations. Sustainable Supplies started offering free shipping for customers last year. It can be expensive for a company that sells heavy items, such as construction supplies, but it has gained the company many more loyal customers.

"People realize how expensive shipping is when they go to return an item that cost $50 and have to pay $26 to ship it back," Fricano said.

Overall, the online retail market has served Fricano's company well, and he looks forward to the challenges.

"[Online merchandising] is definitely a knife fight, it’s the wild west," he said. "It’s the final frontier of the retail economy."

Image via Sustainable Supply