Archived Story

Retailers want loophole closed

Published 10:48pm Wednesday, January 18, 2012

LANSING — Michigan retailers of all sizes and from every corner of Michigan Tuesday called on the Legislature to take action on bipartisan House Bills 5004 and 5005 to close the online sales tax loophole.
“Our Michigan agri-business job makers operate in a fiercely competitive international marketplace, but our state’s own tax policy hamstrings their efforts and makes it harder to succeed,” said Jim Byrum, president of the Michigan Agri-Business Association.  “Michigan’s tax code should be fair and, in no way, should it give a leg up to businesses that operate outside our state.”
“Lawmakers and the governor took great strides in 2011 to make Michigan’s tax code more fair and more competitive,” said James P. Hallan, president and CEO of the Michigan Retailers Association, which represents 12,000 storefronts.  “For 2012, passing the Main Street Fairness Act remains on the to-do list because, simply put, a sale is a sale is a sale, and, right now, local job makers are put at a significant competitive disadvantage that threatens Michigan jobs.”
Hallan also noted the addition of the Michigan Agri-Business Association and the Michigan Grocers Association to the growing statewide effort urging lawmakers to enact e-fairness legislation.
“Together, our grocery stores and agri-business partners employ thousands of Michigan workers and also feel the negative impact of our current unfair internet sales tax collection,” Hallan said.
When consumers buy a product online, Michigan law says the consumer must pay the same sales tax he or she would if buying the product from a store in person. Under Michigan’s current sales tax collection system, out-of-state, online-only retailers are exploiting the massive legal loophole, allowing them to forgo collecting sales tax at the point of sale.
Online-only retailers use this loophole to attract shoppers away from brick-and-mortar businesses by using deceptively lower prices, since Michigan retailers must add — and collect — the 6 percent sales tax to the customer’s bill.
As a result, Main Street businesses are put at a disadvantage that puts Michigan’s business community at risk.
Last fall, Reps. Eileen Kowall and Jim Ananich introduced the Michigan Main Street Fairness Act, a bipartisan legislative package that protects job makers across the state by closing the sales tax loophole putting Michigan businesses at risk.
To close the sales tax loophole the Michigan Main Street Fairness Act:
n Moves online-only retailers under the same sales tax collection laws under which Michigan brick-and-mortar businesses operate; and
n Expands the definition of “nexus” or “physical presence” to include retailers who conduct business through affiliate businesses in Michigan or own subsidiary companies in an attempt to avoid paying sales tax.
“Reps. Kowall and Ananich have provided real leadership on this issue and Michigan’s economic recovery will see an additional boost if their legislation to fix our flawed sales tax system is taken up and enacted,” Linda Gobler, president of the Michigan Grocers Association said.
“For Michigan consumers to get the best prices, competition among new businesses and new forms of commerce is critical, but it must occur on a level playing field.  It is time for Michigan to stop picking winners and losers while giving all of the advantages to out-of-state online mega-retailers.”
According to a report by Lansing-based Public Sector Consultants, the sales tax loophole has a significant negative impact on job makers and the state’s economy.
The study found that closing the loophole would lead to the creation of as many as 1,600 new jobs, would increase investment in Michigan’ economy in the form of sales at brick-and-mortar retail outlets by as much as $126 million per year and would save the state as much as $141.5 million in otherwise lost sales tax revenue from electronic remote sales in 2012 alone.

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