On June 21, the U.S. Supreme Court issued a decision that has profound impact for thousands of retailers in traditional brick-and-mortar stores in the Washington area and around the country. The decision that now requires remote retailers whose in-state sales exceed a certain threshold to collect use taxes helps level a playing field that had tilted towards e-commerce for more than two decades.
As a Washington-based investor and developer, I have long sympathized with and been grateful for the extraordinary sacrifices store owners make in leasing space and passing on sales tax revenues to our community. Since the early 1990s, this commitment by brick-and-mortar retailers has led to revenue imbalances with a growing number of e-commerce outlets — many offering similar or identical offerings without the burden of taxes. Most of us are familiar with the term “shop in-store and buy online,” a descriptor for what has led traditional retailers to seek “marketplace fairness,” both at the state and national level.
In extreme cases, such as with national chain bookstores, e-commerce’s impact has been dramatic. Locally, retailers are upbeat but also cautious when opening up shop in D.C., a sophisticated capital where residents are well aware of their online options. Sharing tax burdens with online enterprises is likely to contribute to new levels of optimism not to mention a sense of relief that all customers are being treated equally with regard to ultimate pricing.
The Supreme Court decision also bolsters real estate owners and developers ability to create great community destinations and to extend the appeal and authenticity of local retailers. We have no doubt that technology will continue to evolve but brand loyalty comes from people experiencing their brand in person.
There is nothing in the Supreme Court decision that can compromise e-commerce’s possible advantages in convenience, speed and inventory choice; in fact, many traditional retailers have been investing in more robust online sites. This practice, while perhaps necessary for these retailers to remain competitive, must not act as a disincentive from the opening of new stores or the enlargement of existing stores. (Politics & Prose, a locally owned bookstore with a location at The Wharf, which my company co-developed, stands as a shining example of bricks-and mortar growth in a challenging environment). To that extent, the new tax ruling will have enormous impact as well.
With this ruling, an important new tool and fairness in treatment has been returned to local store owners. Indeed, all businesses, even those without any physical presence in the U.S., including foreign-based businesses, that have sales to U.S. customers, will face increased sales and use tax compliance in concert with those sales and use tax burdens now shouldered in brick and mortar stores.
Lobbyists for web retailers and online businesses are already mobilizing and seeking alternatives to the ruling via legislation. If we care about our local merchants, the long hours they devote to service, the experience they offer and the dazzling array of merchandise we can find in their establishments, we must work hard to ensure that the Supreme Court ruling stands. In the words of Chief Justice John Roberts, “Armed with today’s decisions, state officials can be expected to redirect their attention from working with Congress on a national solution to securing new tax revenue immediately from remote retailers.” At long last, a level playing field.