January 30, 2012
AVMA backs legislation forcing online sellers to remit sales taxes
Marketplace Equity Act could 'level the playing field,' group says
By: Jennifer Fiala
For The VIN News Service
Brick-and-mortar small businesses — a category that includes most veterinary practices — have long reviled the leg up Internet sites gained in 1992 when the U.S. Supreme Court ruled that for a state to collect tax on sales to residents, the business they're buying from must have a physical presence there.
Veterinary groups are rallying behind the Marketplace Fairness Act, a legislative attempt to get Internet retailers such as PetMed Express to collect and remit state sales tax.
In that decision, tax-free Internet shopping was born.
Now the American Veterinary Medical Association (AVMA) and 26 state veterinary associations are lobbying Congress to address the tax laws they believe give Internet retailers an advantage over physical stores, veterinary practices included. They've joined hundreds of other business and trade groups in support of HR 3179, the Marketplace Equity Act of 2011.
HR 3179 calls for creating a federal mandate to aid states trying to force online retailers to collect and remit tax on sales, regardless of the Internet company's physical location.
The bill is pending before the House Judiciary’s Subcommittee on Courts, Commercial and Administrative Law; there is no Senate companion. On Jan. 18, the AVMA sent a letter in favor of e-commerce tax fairness to House Judiciary Chairman Lamar Smith and Ranking Member John Conyers. It was co-signed by veterinary associations in Alaska, California, Colorado, Delaware, Georgia, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Michigan, Minnesota, Nevada, New Jersey, North Carolina, Oklahoma, South Carolina, Tennessee, Utah, Virginia, Washington, West Virginia, Wisconsin and Wyoming.
HR 3179 targets the tax breaks online retailers got in Quill Corp. v. North Dakota, when the Supreme Court banned states from requiring remote sellers to collect sales and use taxes owed on purchases from out-of-state vendors such as online retailers and catalog companies.
Twenty years later, contention surrounding the 1992 decision has expanded with the breadth of the Internet, and cyber retailers such as eBay and Amazon are weighing in. The mega-corporations are among those taking aim at HR 3179 and other proposed efforts to empower states to require out-of-state Internet companies to collect sales tax. They argue that such a requirement would disproportionately hurt small sellers with shops in their online marketplaces, in part because the complexity of the current tax system is unreasonably burdensome.
Simply put: Businesses will need to spend more to keep up with the ever-changing landscape of state sales tax regulations, multiplied by 50. Meeting such requirements will pave the way to higher consumer prices.
But if all shoppers paid their share of state sales tax, the revenues could address fiscal shortfalls within state governments, proponents for HR 3179 contend. Online shoppers are supposed to declare and pay sales tax on goods they buy from out-of-state retailers, but few do. The National Conference of State Legislatures estimates that this year, $23 billion in state taxes will go uncollected on online purchases.
“Congress has an opportunity to enhance states’ rights over sales tax collection authority and, in the process, close a loophole that will level the playing field for our nation’s small businesses, including veterinary clinics,” said Dr. Ron DeHaven, the AVMA’s chief executive officer, in a news release.
Sales of pet medications, parasiticides in particular, are a traditional revenue stream for veterinary practices, which charge clients state or local tax on goods purchased.
Online-only pharmacies such as PetMed Express and Drs. Foster & Smith are not obligated to do the same, except for purchases by consumers in the states where they're located.
Critics of this system believe such online tax savings, when combined with free shipping, make it extremely difficult for veterinarians to compete. But Dr. Race Foster, co-founder of Drs. Foster & Smith, believes that the drive to collect tax on Internet sales will have unintended consequences. For veterinarians, that could mean more owners will be less able to afford pet health care. He wants sales tax removed from pet medications, regardless of where they are purchased.
“Are people really ready and deserving of a tax on their own personal prescriptions as well as that of their pets? Do they deserve an added tax on medications, which raises the cost of health care?” he said by email to the VIN News Service.
HR 3179, however, isn't about health care or debating whether medications should be taxed. It's about fixing a tax inequity, stated a Nov. 2 letter to Congress signed by AVMA and other groups in support of change.
"Main street retailers are jeopardized as a result of the insurmountable price disadvantage created by this government subsidy along with 15 million bricks-and-mortar retail jobs and one in 10 jobs related to shopping centers," the letter reads. "Recent data suggests that one in four jobs is directly or indirectly related to the retail sector."
VIN News Service commentaries are opinion pieces presenting insights, personal experiences and/or perspectives on topical issues by members of the veterinary community. To submit a commentary for consideration, email email@example.com.
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