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Retailers call on state to level Internet sales-tax playing field

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Early returns for Cyber Monday indicate another year of record-breaking Internet sales, which means New Jersey and its shops are missing out on even more of the business done by online-only retailers that do not collect sales tax, according to one expert.

John Holub, president of the New Jersey Retail Merchants Association, said Wednesday the loophole Internet retailers are taking advantage of is "the number-one issue that is impacting New Jersey retailers."

Holub said Cyber Monday sales increased more than 20 percent over last year, "and I really think this highlights more than ever the unfair advantage that these online-only retailers have over brick-and-mortar stores."

Both Mike Grotz, owner of Cyclesport, in Park Ridge, and John Morris, owner of Stewart Morris Inc., in Madison, said they have had customers come into their stores to view or try on a product, only to say they can get it cheaper online.

"In our business, before it was online, the bicycle business was challenged by mail-order catalogs … we had to make adjustments to the way we run our business," Grotz said, adding that he's brought more employees on to provide additional services to customers that aren't available online.

"While our business has grown, the cost of growing that business has increased dramatically," Grotz said.

Gary Passanante, mayor of Somerdale, said in addition to the lack of sales tax revenue being generated by online sales, the loophole also hurts towns by reducing the amount of property tax that can be collected on physical stores and decreasing foot traffic in downtown areas.

"Downtowns survive by the fact that you have people physically coming to locations," Passanante said. "That loss of foot traffic is a major impact to our communities, and quite honestly people want to live in places where you have access to convenient shopping. There is a lot of spillover of issues with the fact that Internet sales are growing at such a rapid pace and they have a seven percent advantage over the brick and mortars."

Holub said retailers, local chambers of commerce and local elected officials are steadily joining the Alliance for Main Street Fairness in order to impress upon the government that changes to the law should be made.

"We are anticipating the state will act; we've begun to have discussions with legislators on both sides of the aisle," Holub said. "They've been very productive discussions, and everyone is extremely interested in this. Obviously, we only have a very limited amount of time left in the lame-duck (session), but at the very least, come January with the new Legislature, we're very optimistic a bill will be introduced and move quickly."

Holub said the state Treasury Department's analysis of revenue lost shows the Chris Christie administration is interested in the issue, but said it was unlikely a position would be taken publicly. Holub also declined to say which legislators were discussing action.

"The issue that can't be lost here is something has to be done now," Holub said. "These online-only retailers need to begin to collect the sales tax and the playing field needs to be leveled. Is it going to be a perfect solution? That remains to be seen."

Write to the Editorial Department at editorial@njbiz.com

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