Local stores normally expect to take a hit on Cyber Monday, that increasingly popular post-Thanksgiving event when consumers head for their computers rather than the mall to do their holiday shopping.
On this year’s Cyber Monday, however, local retailers had a reason to cheer.
On Dec. 2, the U.S. Supreme Court declined to hear a petition by Internet giants Amazon.com and Overstock.com to block a New York law that requires them to collect sales taxes for online purchases in New York.
The court’s action is not the last word. But it gives an opening to Congress and the states to help level the playing field for brick-and-mortar retailers, who face a competitive disadvantage because the price of their products includes local taxes that online retailers have fought vigorously, and often successfully, to avoid.
Such reform is worthwhile. Hawaii retailers who collect taxes on sales to support government and public works — and who keep local residents employed — are losing ground to online retailers who do neither.
Shopping on Cyber Monday increased anywhere from 16 percent to 30 percent this year, according to surveys by IBM Corp., Adobe System and others. November retail sales overall — including Black Friday — were anemic, posting a 1.9 percent increase, the data firm Retail Metrics reported.
The Legislature has explored ways to get online retailers to collect taxes on sales to Hawaii residents, which could result in more millions of dollars for state coffers.
New York’s approach defined an online retailer’s "physical presence" to include affiliates who direct sales to the online retailer in exchange for a commission. A similar attempt by the Legislature to establish a nexus with online retailers in Hawaii failed in 2009.
In 2012, lawmakers tried to resurrect a plan to join 24 other states who participate in the Streamlined Sales and Use Tax Agreement, which provides a technical mechanism for online retailers to identify tax rates and collect and remit state taxes.
Because Hawaii has a general excise tax, not a traditional sales tax, concerns that joining the agreement could require a significant overhaul of our current tax system made this option a non-starter. Besides, the program depends on voluntary cooperation by online retailers.
But it does address a tax quandary: Hawaii consumers actually are required to pay a 4 percent use tax on out-of-state purchases via catalogue, direct mail or the Internet, but it’s a tax that is virtually impossible for the state tax department to calculate or collect from individual purchasers.
A better option appears to be the Marketplace Fairness Act of 2013, which would give states the authority to require online retailers to collect sales or use taxes on purchases. The U.S. Senate approved it; the U.S. House has yet to vote on the measure.
Even so, the writing is on the wall. Amazon already collects sales taxes in 16 states. Congress could settle the legal skirmishes now being fought state by state and bring some certainty to retailers, wherever they are located.
Given Hawaii’s already high cost of living, the prospect of making Internet shopping more expensive, even by only a few dollars on a purchase, seems to add insult to injury. But the Internet marketplace is vast, with countless opportunities to find a good deal. Giving our local retailers a fighting chance to compete, and supporting the local economy at the same time, seems a worthwhile trade-off.
