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E-Fairness bill: It’s about compliance, not a new tax, backers insist

The proposal would require Internet retailers such as Amazon to charge a 7 percent sales tax on items sold in Minnesota.

Sen. Geoff Michel
Sen. Geoff Michel

If something such as the E-Fairness legislation looks like a new tax and increases state revenues as a new tax would, isn’t it a new tax?

And if it’s a new tax why were such Republican legislators as Sen. Geoff Michel and Rep. Pat Garofalo standing with DFLers and a host of Chamber of Commerce people and small-business owners supporting a measure that would add $10 million to the state’s general fund in the next biennium?

“This is not a new tax,’’ insisted Michel of a proposal that would require Internet retailers such as Amazon to charge a 7 percent sales tax on items sold in Minnesota. “This is about tax compliance, about tax enforcement (of existing tax law). We need to update the tax code.’’

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On a lovely spring morning, an unusual grouping of Republicans, DFLers, shop owners, representatives of about every business and retail organization in the state, pushed the Legislature to act on a bill that would require national online retailers with “affliliates’’ in the state to start collecting the sales tax now collected  by Minnesota retailers even when their customers order on line.

“Amazon needs to play like we play,’’ said Roberta Bonoff, owner of the St. Paul Creative Kidstuff shop where a media event was staged this morning.

Few pay the voluntary tax

Currently Minnesotans are supposed to voluntarily pay the sales tax – by filling out a specific tax form – when their online purchases exceed $770.

Not surprisingly, this system is not working. Revenue Commissioner Myron Frans said that in 2010 about 700 Minnesotans volunteered to pay the tax, which amounted to “hundreds of thousands of dollars’’ in revenue for the state.

The E-Fairness legislation, which has the support of Gov. Mark Dayton, likely would mean about $10 million in revenue in the next bienium, according to Frans.

Just as importantly, according to a handful of retailers who spoke this morning, the legislation would at least help both big box stores, such as Best Buy, and small-business owners compete with the likes of Amazon.

Locals start off with a 7 percent deficit

As it is, a small shop such as peapods, a St. Paul store offering “green’’ toys and other products for children, starts off with a 7 percent deficit when competing with the large online companies.

To add insult to injury, peapod co-owner  Dan Marshall said, Amazon even has developed a phone application in which customers can come into a shop such as peapod, scan the store’s price and Amazon will counter with its price comparisons.

Every small retailer, Marshall said, now has the experience of shoppers using main street stores as “showrooms’’ to get the look and feel of a product. Once they check it out, they often make their purchase online.

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Garofalo had a word for Minnesota’s current system.

“Stupid,’’ he said.

Main-street businesses pay property taxes, hire Minnesotans to work for them, pay state income taxes, sponsor Little League teams and, in the end, the state has a system that essentially subsidizes businesses that make no investment in Minnesota.

System goes back to catalog days

The current volunteer-to-pay-the-tax system, by the way, precedes the Internet revolution. It goes back to the days of catalog shopping.

But clearly the development and expansion of Internet shopping has fueled this push for a change in the system. Recent stats show that nationally Internet purchases now amount to 10 percent of retail sales and the number will only increase.

The small retailers this morning said that even a “level playing field’’ on sales taxes won’t suddenly make them price competitive with the national online giants. But it would at least be a start.

Rep. Tim Mahoney, DFL-St. Paul, said that IF the E-fairness bill could get to the floors of the House and Senate, it would easily pass on a bipartisan basis.

But getting there could be the problem.

‘Sometimes good ideas get lost’

Michel talked of the unpredictability of the last weeks of a session.

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“Sometimes good ideas get lost,’’ he said.

There also is the reality that there is a segment of conservative Republicans who believe that this may be fair, but if it looks like a tax increase, then it must be stopped.

Michel, who is ending his Senate career at the end of this session, said he is among those Republicans who have taken the no-new-tax pledge.

“My wall is full of things from Phil Krinkie (head of the anti-tax Minnesota Taxpayers League) and Grover Norquist,’’ Michel said. “This is not a tax. This doesn’t raise a tax. It’s actually a jobs bill.

It’s about compliance and Minnesota jobs.’’