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Online disadvantage is $23 billion and expanding

Following up on last week’s commentary (A dot com disconnect and Canadian e-commerce opportunity revealed), the legislative loophole that has U.S. retailers at a disadvantage to their Canadian counterparts was on display again this week during congressional testimony in Washington, D.C. Offering testimony was Katherine Lugar, EVP public affairs for the Retail Industry Leaders Association (RILA), a trade organization where Target chairman, president and CEO Gregg Steinhafel serves as chairman of the board of directors.

RILA supports passage of legislation called the Main Street Fairness Act that was introduced last year and could help states collect an estimated $23 billion in sales taxes that go unpaid on purchase made at online only retailers.

“A sale is a sale is a sale. Whether it takes place online or at a local business, the same rules should apply online that apply on Main Street,” according to Lugar’s prepared testimony.

The trade group contends the current $23 billion in sales that that goes uncollected will only grow larger in the years ahead as e-commerce continues to grow.

According to RILA, a pre-Internet loophole prevents states from enforcing their sales tax collection laws when purchases are made online. Consequently, while local retailers collect and remit sales taxes on purchases made in their stores, their out-of-state online competitors do not. The result is what RILA charitably referred to as a “perceived price advantage of between 6% and 10%.”

For background on the issue and to read Lugar’s full testimony, click here.