29 PARADISE LANE
If you are like me, the word tax isn’t a positive conversation starter, in fact, it is quite the opposite. But when it comes to small rural communities, there are taxing discussions that must be had. Small local businesses in rural communities have long faced significant challenges in competing with online retailers. The rise of e-commerce has reshaped the retail landscape, leading to an uneven playing field for brick-and-mortar establishments. However, implementing online sales/use tax policies can level this playing field and support the survival and growth of small local businesses. In this column, we will explore the critical importance of online sales/use tax, supported by figures, examples, and studies, as a means to empower rural communities economically.
One of the primary reasons online sales/use taxes is critical for small local businesses in rural communities is that it helps level the playing field against e-commerce giants. Without such tax policies, online retailers often enjoy a price advantage over local businesses since they are not required to collect sales tax in certain jurisdictions. This discrepancy can discourage consumers from supporting local businesses, thereby undermining their survival and growth. According to a study conducted by Civic Economics, for every $10 million in online sales, approximately 200 local jobs are lost. Furthermore, the study found that if online sales were subject to the same sales tax as local businesses, it would generate billions of dollars in revenue for local governments, which could be invested in community development initiatives.
Another reason for consideration of implementing online sales/use tax policies is that it not only levels the playing field but also supports the overall health of local economies. When consumers purchase goods online without paying sales tax, the revenue that could have been generated for the local community is lost. This revenue is crucial for funding public services, infrastructure development, and community improvement projects.
A notable example is the case of South Dakota, which passed a law requiring online retailers to collect sales tax. Following this implementation, the state witnessed a significant increase in sales tax revenue, providing funds for public education, healthcare, and infrastructure upgrades. Small businesses benefited from this additional revenue as well, as it facilitated community growth, increased employment opportunities, and attracted further investment.
In a study conducted by the U.S. Government Accountability Office (GAO), it was estimated that state and local governments could have collected between $8 billion and $13 billion in sales tax revenue in 2017 if they were able to enforce the collection on remote sales. Such revenue can be vital for small local businesses in rural communities, as it enables them to invest in marketing, employee training, and expansion, leading to enhanced competitiveness and community growth.
Another positive aspect of having local sales/use tax polices is that it can aid in preserving your community character. Small local businesses play an integral role in preserving the unique character and identity of rural communities. They provide personalized services, foster social connections, and contribute to the distinct cultural fabric. However, when these businesses struggle to survive due to the competition posed by online retailers, communities risk losing their local charm and becoming homogenized.
By implementing online sales/use tax policies, rural communities can protect their local businesses, thereby preserving their unique character. When consumers are encouraged to support local businesses through equal taxation, it strengthens the sense of community pride and connection. Additionally, depending upon the laws and guidelines of each state and community, the revenue generated from online sales/use tax can be reinvested into initiatives that promote community development, such as supporting local arts, improving public spaces, and enhancing tourism.
Online sales/use tax is not just about taxation; it is a critical tool for empowering small local businesses in rural communities. By leveling the playing field, supporting local economies, and preserving community character, these tax policies contribute to the survival, growth, and overall prosperity of rural areas. Implementing such policies is a vital step towards fostering community resilience and ensuring a vibrant future for small businesses.
John Newby is a nationally recognized Columnist, Speaker, & Publisher. He consults with Chambers, Communities, Business & Media. His “Building Main Street, not Wall Street,” column appears in 60+ newspapers and media outlets. As founder of Truly-Local, he assists chambers, communities, media, and businesses in creating synergies that build vibrant communities. He can be reached at: John@Truly-Local.org.