Government, Retail, and Technology

Brick-and-mortar businesses welcome online sales tax

Senate Fiscal Agency projects the law will bring in $50M in new revenue annually.

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LANSING — Many businesses across Michigan will benefit from a new law that subjects online retailers such as Amazon and to the same 6 percent sales tax that “brick-and-mortar” businesses collect from consumers.

The Main Street Fairness Act will affect any online retailer that has a physical presence in Michigan, or has subsidiaries that have a physical presence in the state. The legislation specifically notes businesses that have warehouses and distribution centers in the state, in what is seen as an attempt to target large online retailers such as Amazon.

When the law goes into effect Oct. 15, it will make Michigan the 23rd state to enact legislation subjecting online retailers to what is more commonly known as the “Amazon tax.”

The Senate Fiscal Agency projects the law will bring in $50 million in new revenue for the state each year. In May, Michigan residents will vote on a ballot proposal to raise the sales tax from 6 percent to 7 percent. If the ballot measure is approved, an additional $8 million in revenue will be raised from the online sales tax.

Under current law, consumers are responsible for reporting any online purchases on their tax returns and paying the 6 percent sales tax. According to a survey performed by the Minnesota House of Representatives, only 1.6 percent of individuals actually report their online purchases on their tax returns. The Main Street Fairness Act puts the burden on the online retailers, rather than individual consumers, to pay the sales tax.

Rep. Bruce Rendon, R-Lake City, explained that while this may seem like a new tax on businesses, that’s not actually the case.

“It’s just a re-establishment of the law to make sure that those taxes are collected,” Rendon said. “It’s not really, in my estimation, a new tax law. The taxes are already supposed to be paid.”

Leon Drolet, chairman of the Michigan Taxpayers Alliance and a former state representative, opposes this legislation. In an op-ed piece for the Detroit Free Press, he argued that while brick-and-mortar businesses are required to collect the sales tax, they benefit more than online retailers from the government services this revenue funds such as police, fire and local roads.

Bill Golden, owner of Golden Shoes in Traverse City and a board member for the Michigan Retailers Association, said the law will level the playing field between brick-and-mortar and online retailers.

“I had a lady return three pairs of boots,” said Golden, whose business does no online sales. “She bought them, then came and returned them the next day. She pulled her phone out and ordered the same thing online at the same exact price because she could save the sales tax.”

Requiring online retailers to collect sales tax is especially important for higher-priced items such as jewelry, said Keith Terwilliger, an administrator at Wexford Jewelers in Cadillac, which does between 20 and 30 percent of its business online.

While online retailers may still be able to offer a better price, this legislation enables traditional businesses to compete better, Terwilliger said.

On higher priced items, “6 percent can make a huge, huge difference,” Terwilliger said. “You could be looking at hundreds of dollars.”

Both Golden and Terwilliger agreed that the $50 million in anticipated sales tax revenue for the state is needed.

“Sales tax money goes to education and government,” Golden said. “Part of that comes back to your local government to run your city. You want roads done; you want police and fire protection. Well, that’s how this money is coming back to your town. It’s a pretty important thing that people forget.”

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