Market Overview

Small Retailer Tells Congress Sales Tax Ruling Will End Online Sellers' Price Advantage without Creating Collection Burden


A small Florida-based retailer who sells both in-store and online told
Congress today that last month's Supreme Court ruling in favor of online
sales tax collection will end a price disadvantage suffered by local
stores without creating an undue burden for internet sellers.

"BrandsMart is looking forward to the new retail landscape," BrandsMart
U.S.A. Executive Vice President Lary Sinewitz said. "We believe that
when we compete on price and good customer service without having to
overcome a discriminatory tax burden, we will be far more successful."

Sinewitz testified
on behalf of the National Retail Federation
this morning during a House
Judiciary Committee hearing
on the impact of the Supreme Court's South
Dakota v. Wayfair decision
on businesses and consumers.

As an authorized dealer for a variety of major appliance, electronics
and furniture brands, Sinewitz said BrandsMart has often been the victim
of "showrooming," where consumers come into the store to take advantage
of sales associates' expertise and see merchandise in person, then order
from an out-of-state online competitor to avoid paying 7-8 percent state
and local sales tax.

"Sometimes the customer will order the product on the phone right in
front of the sales person who has just invested a significant amount of
time in educating that customer," Sinewitz said. "We will often engage
in price matching, but our profit margins are slim, and we cannot afford
to absorb the cost of the tax."

BrandsMart began selling online itself several years ago and now sells
to customers in the 48 contiguous states. Online sales make up about 5
percent of its business, but the majority of its sales remain in-store.

In Wayfair, the justices upheld a 2016 South
Dakota law
requiring all online merchants with more than $100,000 in
annual sales to state residents or 200 transactions with state residents
to collect sales tax. The ruling reversed
the court's 1992 Quill decision
that online sellers could only be
required to collect in states where they had a physical presence. Under
Quill, the court said complicated sales tax laws across the country made
it too difficult to know how much to collect otherwise. But NRF and
others successfully argued that Quill was outdated because computer
is now available that automatically collects sales tax.

Sinewitz said his 10-store company and smaller members of NRF's Small
Business Retail Council originally thought online sale tax collection
might not be viable unless states provided free collection software.
After more research, however, he discovered that software is available
from several private vendors at affordable prices.

"I feel confident that BrandsMart can quickly come into compliance with
whatever collection requirements may be imposed for a modest fee, and
that this will give us the ability to also compete and expand our
internet sales," he said. "What once loomed as a potential compliance
nightmare now appears to be an incidental cost of doing business."

Sinewitz said his company is negotiating a contract with a firm that
will provide online sales tax collection and remittance services for
less than one-tenth of 1 percent of his online sales. Using the
requirements of the South Dakota law as a guide on the assumption that
it will be copied by other states, the firm was able to calculate the
number of states where BrandsMart sells enough to be required to
collect. It expects to set up the system within a few weeks and will
monitor changes in tax rates and regulations to ensure compliance going
forward, he said.

About NRF

The National Retail Federation is the world's largest retail trade
association. Based in Washington, D.C., NRF represents discount and
department stores, home goods and specialty stores, Main Street
merchants, grocers, wholesalers, chain restaurants and internet
retailers from the United States and more than 45 countries. Retail is
the nation's largest private-sector employer, supporting one in four
U.S. jobs — 42 million working Americans. Contributing $2.6 trillion to
annual GDP, retail is a daily barometer for the nation's economy.


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