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Our view: Take away online sellers' tax advantage

Herald editorial board

The irony is thick.

The same day Kmart announced another round of closings nationwide — including in Thief River Falls — a group of state attorneys general signed on to support an initiative to collect taxes from out-of-state internet retailers.

South Dakota is getting the credit. According to The Associated Press, that state is asking the U.S. Supreme Court to consider whether retailers can be forced to collect sales taxes in states where they do not have a physical presence. It's becoming an old argument, but it also is becoming an acute issue, because many internet retailers are at an advantage over companies that have made brick-and-mortar investments in our towns.

Use Thief River Falls as an example. Kmart announced Thursday that the store there will close in January, one of 45 locations expected to permanently lock their doors this winter. The parent company, Sears Holdings Co., also plans to close 18 Sears stores in January.

The closing in Thief River Falls comes just a couple of months after the J.C. Penney in that town also closed.

Those companies — Kmart and J.C. Penney — made a commitment to Thief River Falls by constructing actual buildings in the community and staffing them with employees from the town and the region. The companies paid property taxes and their payrolls helped support other businesses in town.

Internet companies don't have to make that kind of commitment, yet they get a decided advantage in business because they don't have to collect sales taxes. Some web-based companies — including Amazon — voluntarily collect sales taxes, but not all do.

Among the 36 states that have signed the brief are South Dakota, Minnesota and North Dakota.

The Associated Press notes that states have asked Congress to address the issue in the past, but with no success. The estimated loss to states varies, but the numbers are staggering: The Associated Press says the loss is roughly $26 billion; the National Conference of State Legislatures puts it around $17 billion.

South Dakota Attorney General Marty Jackley said his state loses about $50 million annually to e-commerce.

A Supreme Court decision regarding North Dakota is the problem. In 1992, the court decided in Quill Corp. v. North Dakota that sellers without a physical presence in a state cannot be required to collect and remit that state's sales tax.

The South Dakota Legislature last year passed a law that required collection of sales taxes from e-commerce businesses, but it was overruled by the state Supreme Court.

Now Jackley wants the U.S. Supreme Court to vote to hear the case.

And so do we — for the sake of fairness, equity and the survival of hometown businesses.

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