Retailer Alliance Warns Online Giants Will Put Them Out Of Business Unless Congress Closes Tax Loophole

A group of retailers is warning viewers in a new ad that online sellers such as Alibaba could put them out of business unless Congress passes a law that would allow states to collect sales taxes on e-commerce. The 30-second television commercial opens with the initial public offering of China’s largest online retailer Alibaba, the biggest IPO in Wall Street’s history, then shows a small business closing in front of a forlorn Santa.

“Thanks to the online sales tax loophole this Chinese company will decimate our local retailers,” the ad’s narrator says. “Unless Congress ends special tax treatment for Alibaba and other online giants, Main Street will never look the same.”

Currently, states only tax Internet retailers that have a physical presence within their boundaries. Amazon.com, for example, only pays sales tax in 23 states, generally where it houses merchandise. Amazon supports federal measures that would make it easier for states to charge sales taxes for e-commerce, since its rivals eBay and Overstock.com, with fewer warehouses, pass on less sales tax to customers.

The online sales tax measure, called the Marketplace Fairness Act, wouldn't create a new tax law but would require states to adopt standardized tax categories and definitions to simplify how retailers collect sales taxes. The goal is to encourage states to collect more sales taxes from Internet retailers, boosting states' incomes and according to the proposal's advocates, level the competition between brick-and-mortar stores passing the sales taxes to customers and online sellers avoiding the taxes.

The Alliance for Main Street Fairness' ad began airing Sunday on political talk shows and on cable in the Washington, D.C., area and Virginia and can also be viewed on YouTube. The alliance doesn’t list members, but its small business advisory board has 16 members nationwide, from booksellers to appliance and apparel sellers.

Several Republican lawmakers, including House Speaker John Boehner (Ohio), Rep. Bob Goodlatte (Virginia) and Sen. Ted Cruz (Texas) oppose the Marketplace Fairness Act. A Boehner spokesperson said in November that the bill would not be up for a vote this year because lawmakers need more time to study the issue, and Cruz has said the measure would harm small e-commerce businesses only to help big brick-and-mortar retailers, the Hill reported.