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As Christmas approaches, retailers take aim at online shops that don't charge sales tax

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The loss of revenue for the state and the loss of competition for retailers in New Jersey “compounds daily,” said New Jersey Retail Merchants Association president John Holub, because of online retailers that avoid the 7 percent sales tax.

“The lost revenue is important,” Holub said. “Bricks-and-mortar stores, before they even open their doors, are at a 7 percent disadvantage because of the lack of these online, Internet-only retailers’ failure to collect sales tax.”

The association commissioned a study, done by the Bloustein School of Planning and Public Policy at Rutgers University earlier this year, which showed in 2009, the state lost an estimated $171 million in revenue from Internet-only retailers not collecting sales tax. That amount could increase to nearly $300 million by 2015.

Holub said he was at the Statehouse today talking about potential legislation on the issue. Holub said other states, like California and Texas, already have implemented legislation to help in-state retailers compete, though “the best solution would be a federal one. But as we all know all too well, we can’t necessarily count on the folks in Washington to do the right thing, and certainly do it quickly.”

Robert Prunetti, president of the Mercer Regional Chamber of Commerce, agreed that the state would need to pick up where federal legislation has been mired.

“The hopeful part is more people are talking about it now. The issue has come to the attention of a number of legislatures,” Prunetti said. “People in the Treasury are examining it from a rules standpoint … the encouraging news is there is discussion.”

“Their feeling is this is not a level playing field,” Prunetti said about the chamber’s members. “They are operating at a competitive disadvantage with these Internet companies, and they would simply like the rules to be applied evenly and comprehensively for all. It’s a fairness issue, and in this tight economy, with small margins, 7 percent can make a big difference.”

Prunetti also said he hopes dialogue continues because consumers are unaware they ultimately are on the hook for the unpaid taxes — consumers are required to add the sales tax to their income tax filing for any online purchase in which the retailer does not collect the tax.

“We get the comment that ‘this is another tax,’” Prunetti said. “It’s not another tax — consumers are obligated to pay for this whether it’s collected by the dot-com company or not. That’s something we need to make clear.”

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