Some Montana small business owners are fighting mad about the bill before the U.S. Senate that would give states the option of collecting sales taxes on online purchases.
Jim Markel of Billings, co-owner of Red Oxx, an outdoors luggage manufacturer, called the bill “crony capitalism” and then switched to “crony bureaucracy.”
Last week, Sen. Mike Enzi, R-Wyo., pushed the Marketplace Fairness Act out of the Finance Committee chaired by Sen. Max Baucus, D-Mont., in an effort to force a Senate floor vote. The vote for cloture requires 60 votes to avoid a filibuster.
“This law is proposed by the Internet giant Amazon to prevent small businesses from prospering online,” Markel said. “They already have 33 percent of all Internet transactions and will now have legislation to maintain or even increase market share.”
The Retail Industry Leaders Association, among other organizations, supports the bill because it says the law would even the playing field: Internet companies would have to pay the same taxes that brick-and-mortar companies pay. Many cities and counties with budget headaches want the estimated $2.5 billion in annual revenues that are “lost” because online sales avoid these taxes.
Montana won’t benefit because it doesn’t have a statewide sales tax, Markel said. And to his knowledge, he said that Wyoming has just one major Internet retailer, Sierra Trading Post, so he wonders why Enzi is carrying this bill.
“From the population standpoint, Wyoming stands to gain the least, so the reciprocal return to Wyoming is tiny compared to the costs to small business,” he said. “It’s ridiculous.”
Enzi said designing software to collect the sales taxes would not be a problem.
But Markel disagrees. The Internet accounts for 96 percent of Red Oxx sales, so setting up software to collect sales taxes in nearly 10,000 different taxing jurisdictions would be hugely expensive and onerous, he said.
Markel and his partner, Perry Jones, started Red Oxx in a basement 20 years ago and now have 26 employees and annual sales of $2.5 million.
Another opponent is Lance Trebesch, chief executive of TicketPrinting.com, a Harlowton company that prints tickets for events in all 50 states, Canada, Australia and the United Kingdom.
“It’s amazing how no one has thought through this bill other than big box retailers who are fiercely lobbying to get this passed,” he said.
The U.S. Senate process also bothers Trebesch, who has 28 full-time and 15 part-time employees.
“For major proposed tax legislation to completely circumvent the Finance Committee is unprecedented,” he said.
Both of Montana’s U.S. senators, Baucus and Jon Tester, oppose the bill.
Amazon.com supports this bill, and that makes Markel even more nervous.
Amazon already lures his customers to its website by saying they can buy Red Oxx luggage there, which they cannot. Once they are on the site, Amazon tries to sell them other luggage, Markel said.
“It’s bait-and-switch and I can’t stop them,” he said.
Amazon wants to control the virtual software that retailers would have to buy to comply with this Marketplace Fairness law, Markel said, which would give the company an even larger advantage.
“Once they know the exact amount the customer spent and they know the zip code and it doesn’t take them long to start profiling and marketing to our customers,” he said. “Our customer list is the most precious thing I own. I guard it with my life.”
This bill hasn’t passed the U.S. House of Representatives.
Companies with annual revenues of $1 million or less would be exempt under this bill, but Markel and Trebesch said that bar is way too low.
Instead, they said Congress should use the U.S. Small Business Administration definition of small business — a company with $30 million in sales.