With failed legislation in Minnesota to collect sales tax from companies affiliated with online retailers like Amazon.com, retail groups in New Jersey are putting more pressure on legislators to pass similar bills at the state and federal level.
"It's been devastating to small businesses and brick-and-mortar retailers. The appliance area has had to create discounts to be able to match their online competition's lack of sales tax," said Robert Prunetti, president and CEO of the Mercer Regional Chamber of Commerce. "Even if the (nexus) bill doesn't go through in New Jersey, I hope the state sees the importance of this legislation. It should be moved forward first, and then let it be challenged."
According to a spokesman for the Retail Industry Leaders Association, it is important for states to take matters into their own hands, with federal legislation on the issue stalled in Washington.
Nearly a dozen Republican governors have thrown their support behind the federal legislation, which would grant states the authority to enforce sales tax and use laws on all retailers doing business in their state, including online retailer affiliates. Gov. Chris Christie has not yet made a public statement on the federal legislation introduced in Congress, or New Jersey's nexus bill, introduced by Sen. Raymond J. Lesniak (D-Union).
According to Rebecca Madigan, executive director of the Performance Marketing Association, which represents companies that earn income from advertisements placed on their websites, Minnesota's nexus tax law "would only harm small online businesses. It wouldn't compel any online retailers to collect sales tax (or) 'level the playing field,' as touted."
But Mike Grotz, owner of Cyclesport, in Park Ridge, said if New Jersey passes similar legislation, it will remove the disadvantage his company faces from online retailers.
"With the way the economy has gone, the reality of it is that most small businesses and midsized businesses have to work harder than we used to just to get to the same point as online stores," Grotz said. "When you sell higher-ticket items … like $20,000 bikes, like I do, there's a substantial disadvantage with an even small percent sales tax, when someone can buy it online for much less money. States are in a situation where they need more tax revenue, not less, especially in New Jersey. I don't know why they would support these online affiliates."
According to Jason Brewer, vice president of communications and advocacy for the Retail Industry Leaders Association, unlike the nexus bill that was defeated in Minnesota on Thursday — which would have counted online companies affiliated with online retailers like Amazon.com as a physical presence in the state — New Jersey's bill would only force subsidiaries of Amazon — like Diapers.com owner Quidsi Inc., in Jersey City — to collect sales tax.
"Amazon is going to expand into New Jersey. At the end of the day, taxpayers will look at Amazon and say, 'You're using our infrastructure, so why aren't you collecting sales tax like everybody else?' " Brewer said. "It's important for governors to support this legislation to remind lawmakers in Washington that this isn't a new tax. We would love to have Governor Christie's support."
But Matthew Cheng, president of West New York-based online coupon site eCoupons.com, said the language of the state Senate bill — and a similar bill that passed the state Assembly — does not specify what online businesses would be subject to the law.
“Businesses of mine don’t have a presence in New Jersey, so I’m concerned if they would consider us a retailer in state,” Cheng said. “The way both bills are worded is that the Division of Taxation will have to sit down and figure out if they’re going to include independent contractors under the law and go after us. It’s all up to the director’s discretion.”
Though Cheng previously said he would relocate out of the state if the current legislation was signed into law, he said even if the nexus tax goes into effect immediately, the division’s uncertainty in defining online affiliates may give him “a little bit of time to figure out what’s going on.”