Blog: Ingrid Ault

Is it worth paying a 6% sales tax to keep jobs in Michigan and build vibrant downtowns? Ingrid Ault, executive director of Think Local First, writes a series on how to not just talk local, but how to live local.

Internet Sales Unfair to Local Independent Retailers

This is part one of a three-part series of actions that you can take to advocate for the local movement.

Michigan Retailers are Hurting
Plain and simple. The struggle to compete with online and catalog businesses creates an unfair advantage that is jeopardizing local businesses, Michigan jobs, and our state's economic recovery.  The main disadvantage to local independent retailers is collection of the state sales tax. Those that do business in Michigan must abide by this law, while those that are located outside of the state of Michigan, do not. Online and catalog retailers use this loophole to pull shoppers away from brick-and-mortar businesses by not having to collect the 6-percent sales tax that in-state retailers must do. As a result, local independently owned businesses are put at a significant competitive disadvantage that puts Michigan's business community at risk.

Legislation to Level the Playing Field
Last year Reps. Eileen Kowall, R-White Lake Township, and Jim Ananich, D-Flint proposed HB 5004, otherwise known as the Michigan Main Street Fairness Act. It would close the sales tax loophole by moving online and catalog retailers under the same sales tax collection laws that Michigan brick-and-mortar businesses operate.  Basically it would expand the definition of "nexus" or "physical presence" to include retailers who conduct business through affiliate businesses in Michigan or own subsidiary companies in an attempt to avoid paying sales tax. The new definition would require that they pay state sales tax, as is already the case in 24 others states, up from five a year ago.

What would this mean to our state?
According to a report by Public Sector Consultant, Michigan is projected to lose as much as $141.5 million in uncollected sales tax revenue this year. Their study found that closing the loophole would directly lead to the creation of as many as 1,600 new jobs and increase investment in Michigan's economy in the form of sales at local independent retail outlets by as much as $126 million per year, thus keeping the wealth in our community at the tax level as well as bringing it to the local level.

"The major implication of this sales tax issue remains an uneven playing field for Michigan-based retailers and out-of-state, online mega-retailers competing for the same purchase," says Ken Sikkema, a senior policy fellow at Public Sector Consultants and a former Majority Leader in the Michigan state Senate.  "While other states are successfully taking action to protect their job makers in growing numbers, Michigan's uneven playing field continues to have negative impacts on economic activity across the state.  Other states are addressing this problem -- why not Michigan?"

Why You Should Help
At Think Local First, we believe this is an imperative step to competing on a fair playing field. You may be thinking, isn't this a new tax? In fact, it is not. State law mandates that you report any uncollected tax from online and catalog purchases that are outstanding on your state tax return. I am one that complies with this, but alas not everyone does. This would close that loophole, return much-needed dollars to our state, and bring us in alignment with the growing number of other states that are making this change.

What can you do to help move this bill forward? Contact your legislatures and tell them your story. Tell them how this affects you as a retailer or member of the community that wants a level playing field for all to compete in. Explain that Michigan needs to get on board with this movement now and not be left behind. Remind them that a sale is a sale, no matter where it takes place and all businesses should be treated equally.  Michigan needs Main Street fairness!

Take action now at this link. Even a brief note saying you support this act is important for your legislators to hear. Please write or call your representative today. Your neighbors, friends, and family are counting on you to do this now and be heard!