Would an Online Sales Tax Help Ankeny Businesses?

Traditional retailers in Ankeny would likely be helped by a federal law that would create a sales tax for online purchases.

Some business groups feel the Marketplace Fairness Act, which is a bill in the U.S. Senate that would require a sales tax for online purchases, would level the playing field between brick and mortar business and online retailers, while others say it will overburden small businesses with tax collection responsibilities.

The Marketplace Fairness Act would help local businesses with storefronts, said Julie Cooper, executive director of the Ankeny Chamber of Commerce.

"Online sales have had a negative impact on storefronts. The proposed Marketplace Fairness Act would level the playing field and eliminate the disadvantage local businesses have," Cooper said.

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The Marketplace Fairness Act would require businesses with more than $1 million in annual Internet or catalog revenue to collect sales tax for online purchases and send them to the state where the buyer resides. A Huffington Post report cites a National Conference of State Legislatures estimate that states collectively lost $23.3 billion in sales tax revenue in 2012 due to online sales.

Ankeny store owner Jen Walter also sees the potential for the bill to even competition between online sellers and brick and mortar stores.

"It is my feeling that requiring anyone who does business of a profitable level to pay sales tax might help to level the playing field," said Walter, owner of Walnut Street Gallery and a Chamber board member. "This would obviously require that individuals get a tax ID number and be accountable to the government, but this also allows them to purchase materials tax free as they are for resale, so they would be saving on the other end."

U.S. Senate could vote on the bill, which has bi-partisan support and the blessing of President Obama, this week.

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Supporters say the bill would help retailers battle a practice called showrooming, when shoppers survey a store's goods and then buy it from an online competitor. Ad Week cites Placed and Gartner research that 60 percent of customers use traditional retailers to examine items they intend to buy online.

Opponents say it would harm small business by making them tax collectors and "put them in a position of having to purchase software to calculate sales taxes, according to the Huffington Post report.

A University of Iowa marketing professor called the bill a mixed bag.

Overall, it should be an equalizer for traditional retailers, but tax collection can be complicated and may require added costs to execute, which could overburden small businesses that are already stretched thin, said Gary Russell, Henry B. Tippie Research Professor of Marketing.

"I think it is probably inevitable in some form, because lack of taxation you could argue does give online firms an unfair advantage," Russell said. "But, if this passes does this solve all the problems that online firms present? No, it doesn't."

Online sales now accounts for 16 percent (and climbing) of all retail, up from 2 percent in 2000, according to a Federal Reserve Economic Data report.