There may be nothing certain but death and taxes. But when it comes to the sales tax on books, the one thing that's sure is that the burden is falling unfairly on bricks-and-mortar independents in 45 states, plus the District of Columbia. (Alaska, Delaware, Montana, New Hampshire and Oregon are the only states with no sales tax.)
Once again, booksellers are talking about leveling the playing field, but this time the charge is being lodged against "click-and-mortar" chain stores as well as e-retailers with no land-based outlets. All are benefiting from last October's Internet Tax Freedom Act, which gave a three-year tax moratorium to online retailers. According to a study last December by Austan Goolsbee, professor of economics at the University of Chicago Graduate School of Business, the absence of a sales tax on the Net makes a huge difference to consumers. As reported in the New York Times and Wall Street Journal, he found that if Internet shoppers had to pay a tax on their purchases, their number would dwindle significantly, as would their spending -- 25% and 30%, respectively.
A Taxing Situation
In New England, one of the areas in which independents have been hardest hit by both chain stores and Amazon, booksellers have taken the lead in pushing for solutions on both a local and national level to enable them to compete in the face of the current moratorium and the prospect that it could be extended indefinitely. The options, as they see them, are either to repeal the sales tax on books, which would involve lengthy state-by-state negotiations with legislators, or to fight for a national sales tax that would apply to all Internet purchases so that states could recoup the hemorrhaging of their revenues. In addition, independents could choose to ask their states to be more diligent in applying current tax laws, especially as they apply to nexus -- a legal term indicating linkage, in this situation the connection between an Internet retailer and a bricks-and-mortar store.
David Didriksen, co-owner of Willow Books, Acton, Mass., a proponent of removing his state's tax on books, pointed out the inherent inconsistencies of Massachusetts tax law: "They don't tax food, clothing or magazines, but they do tax books. That means you can sell a copy of Hustler magazine without charging tax but not a copy of Make Way for Ducklings."
Fran Gardner, manager of the World Eye Bookshop, Greenfield, Mass., opposes Internet taxes and would like to see the state sales tax eliminated not just on books but on music and video as well, in order to help other retailers that have been hard hit. "We work in a state that still has Blue Laws. For the longest time, we were forced to set our hours to the rules of the town, while chains headquartered outside the state could open at any time," she told PW. "I'm for having the rules be fair for everybody across the board. If you transact business in one way, you charge sales tax. In Massachusetts, the Bible isn't taxed. We're a store with a variety of traditions. Do you tax The Book of Black Magic? It's somebody's sacred text."
In Massachusetts, textbooks are also tax exempt, but with the proliferation of trade books in the classroom, the true definition of "text" is not always open and shut. "Books are a different kind of commodity," commented Hillel Stavis, co-owner of WordsWorth Books in Cambridge. "That's why the post office has a book rate. It's only the tax structure that distinguishes between textbooks and nontextbooks."
For Jeremy Grainger, general manager of the MIT Press Bookstore, also in Cambridge, the issue g s beyond just books and into the heart of today's Information Age. "It is time for the publishing and bookselling communities to take a strong, aggressive position. There should be no tax on any books or, for that matter, any forms of information." He disagrees with those who want to impose a national sales tax. "It's equivalent to mail order, and it's not going to win us any friends among the consuming public," he maintained.
James Lawton, owner of Brookline Village Books, Brookline, Mass., a used bookstore that now d s 50% of its sales online, views the current state tax situation as putting local booksellers at "a competitive disadvantage. It penalizes the tax-collecting retailer, because the Internet consumer is getting an instant tax rebate and perceives in-state books as being more expensive." He regards the possibility of a federal sales tax as a nightmare of paperwork but finds no solace in the idea of state governments forcing Internet retailers to pay up. "I really don't mind collecting sales tax for my state as a brick-and-mortar shop. However," he added, "I would definitely mind collecting taxes for every government entity from Hawaii to Maine!"
Just Say No
Several booksellers have already begun lobbying their state legislators to repeal the tax on books. Richard Zacks, co-owner of Books on the Square, Providence, R.I., lives in a state with one of the highest sales tax rates, 7%. "It's a difficult issue," he told PW, "because everybody -- booksellers and anyone who thinks about sales tax -- is pretty clear that it's an unfair situation to have some book sales taxed and some book sales not taxed. Obviously it has an effect on local sales." His argument in defense of removing the tax on books is based on economics. "The existing Internet tax exemption," claimed Zacks, "is hurting jobs in Rhode Island. We're a very tiny independent bookstore, and we employ a lot more people in Rhode Island than Amazon. The other thing I think is demonstrably true is that one of the few advantages of Internet sales is not paying sales tax." Because of the surcharge on freight, ranging anywhere from 32% to 92%, "most people would find it more convenient and less expensive to buy locally" if there wasn't a sales tax.
This past spring, Vermont passed legislation eliminating the tax on clothing under $120. Ed Morrow, co-owner of Northshire Books, Manchester Center, Vt., contacted a lobbyist about tacking books onto the original bill. He was told that "this is going to be hard enough to get through." But Morrow isn't letting it rest there; he's lobbying for legislation as early as next year. "The governor is well aware of this issue," he said, "and the effect on the independent small-town merchant, which is so much a matter of Vermont life."
Going for It
The ABA, too, has long been aware of the effect of the moratorium on Internet taxes, not just in New England but throughout the country. "New England booksellers are raising exactly the same issues that have been raised across the country. They are right on point," ABA COO Oren J. Teicher told PW. "More and more booksellers are going online. With the launch of Booksense.com, it's at the front of a lot of booksellers' minds."
Teicher continued, "We believe that the playing field should be level, that retail is retail. The margins in this business are so microscopic that a 6% difference is enormous. We're going to make the case that for those stores with a presence in a particular state -- especially those retailers who are cross-merchandising a physical presence and a cyberspace presence -- there is nexus," he explained, referring to the ABA Internet sales tax action kits that have just been sent to members (see sidebar).
"It's only now becoming clear to most state and local governments that their sales tax is flat or diminished," Teicher said, alluding to the fact that state governments derive more than a third of their revenues from sales tax. "The book business is a relatively modest piece of this pie, but it d s get to the heart of what kind of services government will be able to provide."
Meanwhile, the president's advisory commission on electronic commerce, which is slated to meet next month, must make its recommendations to Congress by April 2000. At this point, one thing is clear, with 6600 separate tax jurisdictions across the U.S., there is no easy solution.
