Dot-com doesn’t pay

Columnist : Albert Paschall

 I should do more shopping on the Internet.  I’m too easily swayed in a store.  I bought this new jacket the other day because the clerk told me I looked just like Harrison Ford when I put it on.  I hate to say she lied, she just used extraordinary salesmanship.  I bought.  Such is retailing.

     Of course she and some 949,000 of her colleagues are living in dread this week.  As Pennsylvania’s retail employees they know that Thanksgiving does bring out the turkeys and a lot of them will be shopping in their stores during the next 6 weeks.

     There are three jobs to get if you want to see just how inhuman our species can be.  Work in a hospital emergency room, the city desk at a newspaper or behind a retail counter.  I’ve done all three and given the choice between pushing a gurney, banging away the disasters of the day at a keyboard or standing for 8 hours behind a counter while somebody worries if their dog’s sitter would like pink or blue gloves I’ll take either of the former especially since they pay slightly more than minimum wage.  And to add insult to injury in Pennsylvania we make them collect about 30% of the state’s annual revenue while their competition doesn’t have to.  Because if you buy off the Internet you don’t have to pay Pennsylvania sales tax.

     While only about 40% of merchandise is subject to the state’s 6% sales levy it’s the big numbers that count.  Big ticket items like jewelry, appliances and electronics have brought in a healthy $2.5 billion into the state’s general fund just since July, $1.6 million above estimates and $156 million more than the personal income tax.

     In May of this year Congress passed a five-year moratorium on Internet sales taxes.  When the bill reached the Senate the National Retail Association and shopping center owners launched an all out attack on the ban. Oklahoma fashion retailer Robert Benham said it best when he told the Wall Street Journal: “We’re not seeking a new tax,” he said, “We are seeking a level playing field.  We are the ones who sponsor the little league teams, buy tables at charity events and hold fashion shows to benefit those charities.  When’s the last time a dot-com did a local charity fashion show?”

     The Ridge administration agrees with Congress.  The Internet and the dot-coms are considered growth industries and somewhere within the administration the notion persists that if the 6% is added to dot-anything sales then the cyberspace economy will come crashing down.  The cyberspace retail economy that doesn’t pay school taxes, doesn’t employ 949,000 Pennsylvanians and as Mr. Benham put it so well doesn’t do much, if anything, for local communities.

     Yet if anything is going to crash in the state, in fact the nation, it is the retail economy.  America, especially in the mid-Atlantic region has too many stores.  In categories dominated by so-called big box stores price cutting will be great for consumers this holiday season but year end earnings will put a dent in shareholder return.  Middle market stores are struggling to find their niche between the discounters and the dot-coms.  Top line retailers are comfortable this year but are vulnerable when times aren’t so good.  One leading economist went so far as to predict that forgetting any recessionary tendencies half the retailers that we have today will disappear in 5 to 7 years.  If we continue to let Internet retailers have the sales tax advantage we can speed up that process and be left with plenty of empty, dark buildings that won’t pay any taxes at all.

     Opponents of Internet sales taxes point to collection problems.  Some say it would be nothing more than an electronic honor system.  Others say that if there is to be a tax at all that it should be Federal so that the IRS can monitor it.  Either way its unlikely that any day soon Washington or Harrisburg is going to take up the issue.  And it’s equally unlikely that someday the Internet will replace all of our stores.  After all, your computer doesn’t know what color gloves your dog sitter might prefer or just how much you resemble Harrison Ford.