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Boston Capital

Online retailers pressed to collect sales taxes

Alan Lavine made a point of telling me that he’s no fan of taxes.

Lavine, along with his father and brother, operate a store called Percy’s in Worcester — a family business that dates back to the 1920s. They sell pretty much everything in your home, from appliances to electronics to furniture and beds. The 6.25 percent Massachusetts sales tax adds up on some of those bigger-ticket items.

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But what really ticks Lavine off is the fact that many Internet retailers competing against him, including the likes of online giant, do not charge customers any sales tax when they buy the same products.

“I can handle price matching, and I can compete on everything else — selection, service, financing,” Lavine says. “The only thing I can’t compete on is the tax issue.”

The fact that the sale of a product, whether it’s a book or a refrigerator, will get taxed in one kind of store but not in another sounds absurd for a good reason.

It’s blatantly unfair and impossible to defend.

This is not new beef. But it has gotten more traction recently — in Congress and elsewhere — and the retail playing field may be shifting. All states with sales taxes on their books want the money. Massachusetts retailers are leaning on Governor Deval Patrick to require Amazon to collect state sales taxes.

The Internet sales-tax loophole relies on a 1992 US Supreme Court decision that applied to catalog companies. The court ruled that a retailer had to have a physical presence in a state for that state to require it to collect sales tax.

The ruling affected just a tiny slice of the retail world at the time. Today, it is a big deal, involving billions of dollars of potential sales-tax revenue.

The people running Internet retailers are no dopes.

They limited their physical footprints and placed distribution centers in strategically located states when possible. The elimination of sales taxes became one more advantage for Web retailers.

Now two forces are pushing back. Of course, they’re both about money.

For one, the biggest Internet retailer of them all is reshaping its business to emphasize same-day or next-day delivery. Amazon, which sold $48 billion worth of stuff last year, will need more distribution facilities across the country to pull that off.

That will place Amazon in more states where it will have to collect sales tax. It is cutting deals with individual states — New Jersey being the most recent — to do just that.

Increasingly, Amazon will compete at a sales-tax disadvantage with other online retailers so — duh! — it now backs legislation to smooth the way for states to collect taxes on Internet transactions. Other retailers, notably and eBay Inc., are resisting.

Meanwhile, many states are struggling to make ends meet.

Some governors, both Democrats and Republicans, are grousing about Internet sales taxes and pushing Congress to pass a law to get around the Supreme Court case and help them collect. It could become a rare bipartisan tax issue.

Legislation under discussion now would address some legitimate sales-tax collection problems. It would exempt small online retailers and limit the number of jurisdictions collecting sales-tax money.

This story is really very simple. A sale is a sale, wherever it takes place. Taxes aren’t popular, but they should be fair.

Steven Syre is a Globe columnist. He can be reached at
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