Online sales unfair to Hawaii retailers

Congress needs to pass the Marketplace Fairness Act (MFA) so there is real and fair competition reflecting 21st century commerce.

America was built on promoting economic growth and business in a fashion that ensures fair competition for all.

The MFA would grant states the authority to compel online and catalog retailers, no matter where they are located, to collect a sales tax at the time of a transaction, exactly like local retailers are required to do. While Hawaii does not have a sales tax, it does have the general excise tax (GET), which applies to almost all sales (including goods and services).

Today, online-only retailers are not required to charge and collect the GET, while local businesses must. The collection of GET is difficult to enforce unless online sellers have either a physical store or a warehouse within the state. 

When the GET is not collected at the time of purchase, the burden falls on the consumer to report and pay. Compliance is virtually non-existent. Based on a recent Ohio State University study, states are estimated to lose $23 billion a year from uncollected sales taxes on online goods.

The current sales tax code is unquestionably confusing for consumers and companies. For example, Amazon is now legally required to collect sales tax in 21 states, including the four most populous: California, New York, Florida and Texas.

The MFA is not an additive tax. It’s about ensuring all companies, regardless of the type of business, pay the same tax.

The tax disparity puts local businesses at a significant economic disadvantage and stifles the overall economy. According to a July 2013 study conducted by Arthur B. Laffer and Donna Arduin, federal legislation that would allow states to close the online tax loopholes would result in a more efficient tax system, a larger tax base, and lower tax rates for all taxpayers. This will increase states’ prosperity and employment, increasing GDP by more than $563 billion and adding more than 1.5 million jobs in the next 10 years. 

It is time for Congress to grant states the ability to correct the unfair application of tax laws that impact our merchants and retailers.

How does the MFA impact our community? Ala Moana Center leases retail space to 290 brick-and-mortar stores and restaurants, which collectively provided more than 3,000 direct full-time and part-time jobs in 2013. Our economic impact study has estimated that upon completion of our current $660 million redevelopment, we will create more than 3,800 additional full-time equivalent jobs. 

The mall contributes more than $23 million annually in real property taxes, conveyance taxes and GET taxes that pay for critical life-safety services, such as law enforcement, fire department, education and other services. These amounts do not include the GET paid by the more than 290 stores and businesses at Ala Moana Center.

Ala Moana Center is not just a place where people shop — it is part of the social and economic fabric of our community. Passage of the MFA allows the stores at Ala Moana and other island brick-and-mortar retailers to compete fairly with online retailers.

The MFA passed the Senate in early May 2013 and is currently under consideration in the House of Representatives. Passing the MFA is simply about enforcement of current tax law. Whether you shop at a store or online, taxation should be fair, and our Ala Moana Center retailers should not be put at a disadvantage by non-enforcement of the current tax law.