The Internet has changed many businesses, but not every business has benefitted from this new technology. As online stores like Amazon have grown, brick-and-mortar companies like Borders, Best Buy and Toys-R-Us have suffered. And now it appears that more retailers feel threatened by online stores. Simon Property Group, owners of hundreds of regional shopping malls across the country, has filed a law suit against the State of Indiana in an attempt to get the state to enforce their own tax laws and to collect sales tax from Amazon.com.
This is just the latest battle being waged in the war of internet taxation and the war is heating up. Earlier this year California announced that it was going to begin requiring online merchants to collect sales tax in that state but this summer reversed their decision. Perhaps worried that even more businesses would leave the state.
As a small business owner I see this move as one which signifies that the influence of online commerce on the retail market is more significant that perhaps once realized. Simon Group is essentially a property developer, they build giant shopping malls and make their money by leasing space to brick-and-mortar stores. For them to take such an extraordinary step tells me that there is significant trouble in the brick-and-mortar retail market.
It is of course no secret that the great recession has taken its own toll on merchants, and the closure of chains like Block-Buster and Borders only creates more empty retail space. For Simon to take this action is an indication that they believe that more of their tenants, their customers, are threatened by online stores like Amazon. They are concerned about their customer base not being there, that there won’t be enough businesses willing to rent space in their malls. Concerned that more retailers will become virtual stores operating out of residences or commercial warehouses, both far less expensive that square footage in a mega-mall.
As the owner of an online store I am of course sensitive to the issue of internet taxation. Surprisingly I am for it, provided of course it is enforced equally among all 50 states. If internet sales taxes are enforced individually by the states then you’ll have some states gain an advantage over others. More specifically, I know that California will start collecting the tax and that will put my business at a disadvantage against my competitors. While I will eventually move out of California because I’m sick of it, that won’t be for several years. My online business would suffer and I would either have to lower prices to offset the tax or move out of state earlier than planned. Neither is really a good option at this point.
Small business owners need to follow this issue very closely. Eventually I expect that some states, under financial strain, will begin to require merchants to collect internet sales taxes. So unless or until some sort of federal sales tax on internet sales, businesses in states that have no state sales tax will find themselves at the advantage.