Tempe's Changing Hands Bookstore is set up for customers browsing its shelves in search of a good read, co-owner Gayle Shanks said.
But some of those roaming the aisles at their leisure return home to buy from online retailers that among other advantages don’t charge sales taxes for transactions.
“We hear it all the time,” Shanks said. “We don’t want to be a showroom for Amazon.”
Changing Hands is one of many brick-and-mortar retailers celebrating an agreement between Amazon.com and Arizona that will require the online retail giant to begin collecting the state’s 6.6 percent sales tax early next year. These traditional retailers hope to see more e-commerce companies follow suit.
“What we’re trying for is parity,” Shanks said.
Garrick Taylor, spokesman for the Arizona Chamber of Commerce and Industry, said the group plans to ask Congress to address the issue of online sales taxes without creating a disincentive for e-commerce.
“We believe in a system where brick-and-mortar sellers are not at an economic disadvantage from their online competition,” he said.
Michelle Ahlmer, executive director of the Arizona Retailers Association, said that while she doesn’t see other online retailers reaching similar agreements the Amazon move will push the issue forward.
“For us it’s all about the ability to compete and to stay open and not have empty storefronts,” Ahlmer said. “The fact that the Department of Revenue has reached this settlement with Amazon gives our congressional delegation some backup.”
Arizona lost an estimated $317.4 million in uncollected sales taxes for online purchases during 2010, costing approximately 5,400 people their jobs, according to a study by Elliott D. Pollack & Co., an economic and real estate consulting firm.
Danny Court, senior economic analyst with the firm, said that e-commerce sales are growing faster than normal retail sales as consumer preferences shift. Traditional retailers could face further sales declines without a law requiring online sellers to collect sales tax, he said.
“Brick-and-mortar stores may be at a competitive disadvantage for more reasons than just that they have to charge a sales tax,” Court said. “But that certainly is an inequity.”
The study predicted that such a law would result in a 24.3 percent shift in purchases to local stores.
Dennis Hoffman, director of the L. William Seidman Research Institute at Arizona State University’s W.P. Carey School of Business, said that while the Amazon settlement is a step in the right direction, there’s more work to be done.
“The current Amazon customers may just simply move to another remote seller that allows them to avoid the tax,” Hoffman said. “These issues will have to continue to be addressed.”
Hoffman also chairs the online retail working group for Gov. Jan Brewer’s Transaction Privilege Tax Simplification Task Force.
The more Amazon is taxed by individual states, the more effort the online retailer will put behind lobbying Congress for a bill requiring all companies to collect taxes on online and remote sales, Hoffman said.
Amazon currently has agreements to collect sales taxes for eight other states.
Arizona’s sales tax, called the transaction privilege tax, implies that retailers are obligated to pay and remit the tax for doing business within the state of Arizona, said Stephan King, chairman of the Arizona Society of Certified Public Accountants.
“The settlement is nothing more than having Amazon comply with the current system,” King said. “There are a lot of other retailers now who don’t pay sales tax in the state of Arizona.”