An interesting column by Liz Peek on TheFiscalTimes.com notes Wal-Mart and other retail giants are banding together behind legislation to require Amazon.com to collect and pay state sales taxes rightfully owed on purchases made online.
OK, but why does Wal-Mart take advantage of its own wide reach to shield profits from state taxation?
As the Peek column notes:
Overall, retail sales over the Internet grew nearly 15% last year in the U.S., and totaled $165.4 billion.
Industry analysts are expecting that figure to swell to more than $188 billion this year. That presents quite a dual challenge to states unable to collect sales taxes on those purchases, and to traditional stores that are losing market share. Consequently, large retailers, and thousands of others across the country, have banded together to demand the playing field be leveled. (emphasis added)
So, Wal-Mart is demanding “the playing field be leveled.” Admirable, perhaps, but ironic, to be sure.
In an April 2007 report for the Iowa Fiscal Partnership, “Leveling the Playing Field,” Peter Fisher illustrates how Wal-Mart has gone to great trouble in tilting the field in its favor on corporate income tax. Wal-Mart created a multilayered, multistate structure to shift at least some profits where they are taxable to states where they are not. In a nutshell, Wal-Mart found a way to charge itself rent to reduce taxable profits.
All done by the book as the book has been written. But it creates an advantage for one retail giant that its small competitors who sell shoes, tires, clothes, office supplies, groceries, etc., cannot take. And Wal-Mart’s strategy is not the only one being used by large, multistate corporations to dodge tax responsibility. Many corporations do so by exploiting loopholes, the seams in tax law that companies use to defeat legislators’ intent.
Iowa could fix this — and level the playing field — with a simple solution already adopted by five neighboring states: Nebraska, Kansas, Illinois, Minnesota and Wisconsin. That solution is corporate combined reporting, supported by Iowa’s last two governors, but not once debated on the floor of the Iowa House or Senate.
When the solution not only could raise money for the state and make the playing field more fair for small businesses, this debate is long overdue.
Posted by Mike Owen, Assistant Director