Editor’s note: This op-ed is by Marc Sherman, founder and co-owner of Outdoor Gear Exchange and Gearx.com.
E-commerce has created thousands of jobs in Vermont and these small businesses are generating millions of dollars in tax revenue even during these difficult economic times. Small businesses like mine that have been at the forefront of new markets and new technologies provide sustainable careers in Vermont. From software developers, to the skilled staff that help get product to my customers around the country, e-commerce is an important part of my business and Vermont’s economy; some of our state leaders realize this.
It is frustrating to see legislative action that would cut significantly into the revenue streams of more than 1,000 small businesses like mine that are currently in affiliation with Amazon.com. For some of these businesses this lost revenue could be the difference between success and failure.
The so-called “Amazon” bill (H143, S54) passed last week by the Vermont House and making its way to the Senate seeks to generate additional sales tax revenue by treating affiliates of Internet malls such as Amazon as physical locations in the state and thus require those malls to collect sales tax on all eligible shipments to Vermont. This would not hurt a big conglomerate like Amazon.com. Instead, it would close off an important tool for small businesses that employ Vermonters, pay taxes, pay for health care and support our communities and village centers.
Proponents of the bill say this action would “send a message” to online retailers that brick-and-mortar stores such as bookstores need a more fair playing field. It is a message that Amazon.com has no interest in receiving.
As a Vermont company with both an online presence and a store in downtown Burlington, I can understand the impetus to pass this bill, but I feel that if passed it will actually hurt the state of Vermont. I know it will hurt my business.
If this legislation is passed by the Vermont Senate and signed by Gov. Peter Shumlin (someone I proudly supported in this last election), Amazon.com says they will sever relationships they have with over 1,000 affiliates in Vermont including my business. They have already responded that way in Rhode Island and North Carolina after these states enacted a similar law.
If Amazon.com shuts off access to its technology (which is arguably the broadest virtual mall online), Outdoor Gear Exchange/Gearx.com, will lose considerable revenue annually. While we are large and diversified enough to absorb that loss as a business, the revenue generated from our Amazon.com affiliation supports four Vermonters we have working on this part of our business. Many of the small businesses that will be affected are sole proprietors that operate their e-commerce sites on their own without the physical and virtual infrastructures to absorb that loss. If this bill passes, they may have few options for the future.
The personal stories about how devastating this bill will be are certainly significant. The bill will also impact the state’s finances negatively in some basic dollars and cents ways including loss of income tax revenue from employees like mine, increased unemployment benefits to be paid out of an already overburdened unemployment fund, and reduced income tax paid by business owners.
One of the supporters of the bill conceded on the floor of the Vermont House that this bill would not increase the collection of sales taxes online. In fact, many think this bill will cost the state money. What then is the point?
Online retailers understand we need to address tax fairness issues in E-commerce and that millions of dollars of use tax are not being paid to the state as due. But we also agree that it is a national issue that needs to be implemented in a fair and equal way across all fifty states in order to actually be fair. The sales/use tax currently being left on the table could indeed help address many states’ financial shortfalls, and I have worked with Congressman Peter Welch to find a good, fair, and simple solution.
I also understand the concerns of other Vermont merchants that think online retailers have an unfair advantage. This bill, however, will do nothing to resolve that issue. Amazon, a primary target of the bill, will simply find non-Vermont companies to continue undercutting local shops by not charging tax. No Vermont business will gain with this bill, but any Vermont business currently using Amazon will lose out and that means the state will end up losing as well. I know it will hurt my business.
