Christian Booksellers Seek Special Sales Tax Treatment
Editors note: In a previous post I wrote about the CBA, the Association for Christian Retail’s public stance on sales tax. You can view my post here. Their view runs counter to the U.S. Constitution, recent Supreme Court decisions and current law. The CBA has now posted an FAQ on their site, which I have reproduced and commented on below.
In the FAQ, the CBA attempts to rationalize sales tax for their competition, but not for themselves. Christian book writers and readers should tell their local Christian bookstore owner or manager that you think the unconstitutional stand of the CBA is misguided, and that it will mean more taxes and higher taxes for all.
The bold text is the Association for Christian Retail question, the standard text is their reply, and the italicized text is my commentary.
1. Most retail booksellers also sell on the Internet to be viable, and most of us are not large corporations. How does this help us?
Because of nexus laws, all retailers who sell via the Internet in the state they are located must pay local sales taxes, as are Internet-only retailers who have agents or facilities in a state. However, brick-and-mortar stores must by law pay their fair share of taxes that fund local community services, but some Internet-only retailers pay no sales or use taxes. This puts retailers who follow local laws at an unfair competitive disadvantage to Internet-only retailers. Fair taxation would help level the playing field for independent retailers.
Nexus laws were reaffirmed by the U.S. Supreme Court as late as 1993. That was not the first time the High Court reaffirmed the law. That is in keeping with the U.S. Constitution and Federal Trade Commission regulations. The CBA and Christian booksellers say they want to abolish nexus laws in favor of a “level playing field,” but the reality is the filed has never been level in the way they now wish. The European Union has a level playing field, but the sales tax there (VAT) is generally 20%-25%, double the amount in most places in the U.S.
The CBA and Christian booksellers are being disingenuous wen they say, sales taxes “fund local community services.” The truth is that sales tax is almost always sent to the state government and it may or may not trickle back to a local community. Sometimes a local area will vote to levy a local sales tax for a limited time for some project, but this is generally only adds 1/2% to 1-1/2% to the state levy. There are five states in the U.S. that collect no sales tax at all.
The CBA and Christian booksellers are being more honest when they say, “This puts retailers who follow local laws at an unfair competitive disadvantage to Internet-only retailers” because this strikes at the heart of the matter. Most Christian bookstores cannot even reach their own narrow vertical market (Christians in their local area), yet they somehow imagine that a national sales tax will cure their malaise. It won’t. People are always willing to pay for service and that is often the missing ingredient in local Christian bookstores.
2. You’re not hurting Amazon.com, you’re hurting small businesses and the “little” guys. There are a lot of Christian books sold on that site and other book sites.
Amazon.com and other Internet-only and big-box websites sell a lot of books at predatory prices, and some of that advantage is because the companies don’t collect and remit sales or use taxes. This can be anywhere from a 5% to 10% unfair advantage. We also understand the needs of small businesses and the “little” guys. The legislation CBA is supporting includes what are called “small seller exceptions,” essentially an exemption of sales and use-tax requirements for remote sales – that is sales that are not to purchasers in the seller’s state and subject to out-of-state taxation. A retailer’s remote sales must be more than $500,000 a year before having to pay sales and use taxes to other states.
Amazon.com, Internet-only and big-box stores do not necessarily sell at predatory prices. Such stores buy in volume and are in a position to offer a lower price to customers, and that’s what customers want. They sell soap and sausages and everything else on that same principle. The CBA and Christian booksellers may claim that “some of that advantage is because the companies don’t collect and remit sales or use taxes” is false regarding big-box stores; they have a nexus in the state where they are selling and gain no competitive edge over a local Christian bookstore in regard to taxation. Big-box stores like Wal-Mart and Target are paying state sales taxes where the stores is located. Wal-Mart, Target and other big box stores also donate money to local sports teams and charities in towns where stores are located.
The CBA and Christian booksellers endorse a “small seller exceptions.” That means all other merchants must pay out of state sales tax, but local booksellers and other merchants are free to make up a half-million dollars on their own web sites without paying sales tax on out of state sales. To some, this will seem like hypocrisy. Christians booksellers become guilty of the same thing for which they are accusing other online sellers. The CBA and Christian booksellers can’t keep their motivation straight. If “funding local community services” is so important to them, why would they deprive their own community of the $35,000-$45,000 tax that would come from that $500,000 of sales?
3. How do you imagine that small sellers are going to be able to afford the accounting necessary to send each state their due?
We are not advocating additional taxation, rather, fair taxation. The whole point of the Streamline Sales and Use Tax Agreement is to overcome this obstacle of complex and expensive reporting and remitting of funds. The agreement, originally established in 1999, provides an efficient and simple way for “remote sellers” who sell more than $500,000 annually in this way to collect and remit sales tax without excessive paperwork or other requirements. Internet retailers are supposed to collect and remit appropriate taxes now for sales made within the state in which they’re located, have facilities, or agents.
The CBA and Christian booksellers ARE advocating additional taxation in the 49 states other than their own. The “Streamline Sales and Use Tax Agreement’ is nothing less than a national sales tax. The percentage will start low and grow. That’s the way it is with all taxes. Today, many states already have a “use tax.” There is a line on many state tax forms that asks citizens the total amount of goods they purchased out of state, and they are supposed to pay that amount. It is the responsibility of each state to collect use tax in this way, and it should not be delegated to out of state merchants, including Christian booksellers.
4. Doesn’t this add more taxation?
No, it means fair and equal taxation so local independent retailers are not at a disadvantage in serving customers. It also means Internet-only retailers who exploit local marketplaces would also contribute to local economies by helping fund public services, such as police, fire, and recreation. When was the last time Amazon.com sponsored a local youth sports team?
The CBA is trying to enable those retailers who have been called to this type of ministry to have a fair chance at fulfilling their mission of broadly providing Christian resources and materials to the church and others. The goal is not to hurt Christian retailers but to help them compete on a level playing field. While Amazon provides a very technically advanced service, it also doesn’t pay its fair share in most cases where it should, and it doesn’t distinguish between the types of products it sells. Amazon would have no position one way or another on product type, whether it’s about pedophilia, bestiality, or the blessings of Christ. However, discriminatory taxation gives them pricing and censorship power they wouldn’t have otherwise.
The CBA and Christian booksellers are not proposing fair and equal taxation. They are proposing a plan that goes against the ideals of our Founding Fathers and the U.S. Constitution. They are proposing a national sales tax. They are proposing a special sales tax exemption for Internet sales activities for themselves and like businesses.
Christian booksellers used to complain about big bookstores like Barnes and Noble, Border’s and Books-a-Million. Then they turned their attention to competitors like Wal-Mart and Target. Now they are blaming a taxation system that has existed since 1787 as the root of their problems. They are putting their hope in the Main Street Fairness Act (H.R. 5660). The reality is that Main Street moved to the Mall about 50 years ago, and it has since moved on from there to the Internet.
The antiquated marketing methods of most Christian booksellers are not relevant in the 21st century. Changing sales tax laws will not help our book selling friends, and the CBA and Christian bookstores need to think about the meaning of Matthew 7:3 as they challenge their successful competitors. Christian bookstores need to stop blaming other companies, external conditions or tax laws for their loss of market share, and begin to reinvent themselves with a new, sustainable business model.
Published on: Mar 23, 2011