Black Friday, the day after Thanksgiving, has traditionally marked the start of the Christmas shopping season. It's a make-or-break time for many retailers, typically the season their operations enter the black, financially. But today's retail landscape is unfairly tilted, strongly, in favor of many online merchants, who don't have to charge sales tax when they don't have a physical presence in the customer's state. In North Dakota, that amounts to an edge of 8.75 percent in favor of the online merchant, and a penalty of 8.75 percent against the brick-and-mortar store. It's a significant reason why retailers today are struggling to survive in a rapidly changing marketplace.
We should all agree that competition should be fair, and that government policies should not skew the marketplace strongly in favor of one type of business. Yet that's exactly what's happening in retail, thanks to a 1992 U.S. Supreme Court decision, Quill Corp. vs. North Dakota. The justices held that a business must have a physical presence in a state before it can be required to collect state sales and use taxes. It's one of the reasons online sales have skyrocketed in recent years, as many consumers have developed the habit of avoiding sales taxes by ordering over the internet.
That helped Amazon become a retail behemoth, though it now pays sales taxes in all states. Amazon, founded in Seattle in 1994, now accounts for almost 4 percent of retail sales in the United States. E-commerce sales grew 15.1 percent in 2016 and represented 8.1 percent of total retail sales for the year, according to the U.S. Department of Commerce. By one estimate, online sales represented almost 42 percent of the growth in retail sales last year. The trend will undoubtedly continue. Online sales are expected to reach 12 percent of retail sales by 2020.
So retail players who have an unfair competitive advantage due to an uneven playing field are racking up the score-at the expense of traditional retail stores, many of which have strong roots in the community. Traditional retailers are a source of jobs in their communities. They pay taxes and are often involved in the civic life of their communities, becoming a vital part of the social fabric. But out-of-state e-commerce giants contribute essentially nothing to support local communities, even as they hollow out the local retail sector.
This is a problem that requires a federal solution. Sen. Heidi Heitkamp, D-N.D., has been an advocate of leveling the retail playing field. She is a co-sponsor of the Marketplace Fairness Act of 2017, which would enable states to require out-of-state businesses or online retailers to collect the sales and use taxes already owed under current law. A similar bipartisan handily passed the Senate in 2013, but did not become law.
This should not be controversial. Heitkamp's Senate and House colleagues should join the co-sponsors of the bill and pass it into law. And, meanwhile, shoppers should remember to patronize their local merchants. We value the convenience of being able to buy products locally. We shouldn't assume that convenience will always be available without our support.
Editorials represent the views of Forum management and the Editorial Board.