Getting to the Heart of Today's Issues

By Bill Mcclellan

ERA: Why is ERA's Government Affairs program so important?

Bill McClellan: The bottom line is that our government affairs efforts are the front line in protecting the industry's reputation, as well as advocating on behalf of our interests here in Washington, D.C. We have an extraordinarily deft team of legal, regulatory and legislative experts who serve on our government affairs committee. Collectively, this committee's work has developed ERA's Electronic Retailing Self-Regulation Program (ERSP) into a program that has proved effective in cleaning the industry of false and unsubstantiated claims over the last couple of years. In fact, this program has served as a pilot program for other organizations interested in self-regulation and is being used by the government as a case study as it discusses self-regulation with other governments around the world. In addition, we have successfully worked on a number of issues important to the remote selling community including Net Neutrality, Regulation E, privacy, as well as fighting the efforts to force Internet retailers to collect sales tax.

ERA: Are there other trade associations that advocate in this space?

McClellan: Yes, and we work with many of them. I think the key difference is that we only focus on the virtual retailer. It has allowed us to take positions others cannot and stay out of battles that are not critical to e-retailing.

ERA: What issues are hot right now?

McClellan: Two issues jump to mind. First, it appears that the relative lull in the Net Neutrality debate might be coming to an end. The AP recently broke a major story on Comcast blocking Internet usage. On this front, it looks like our worst fears are beginning to be realized, as broadband providers are using their market power to determine the winners and losers on the Internet. Secondly, there is a major push this fall from a number of brick-and-mortar retailers to force electronic retailers to collect sales tax. This should concern anyone who sells remotely and does not meet the nexus standard in a given state.

ERA: What is the nexus standard, and how does it relate to an electronic retailer having to collect sales tax?

McClellan: The rule on collecting sales tax is that if you have a physical location, or nexus, in a state, you must collect sales tax. Brick-and-mortar retailers believe that this is unfair and creates a disadvantage in competing with e-retailers and also threatens public safety. They have asked Congress to act. We disagree.

In fact, we believe that the implementation of this tax collection burden would tilt the playing field against e-retailers. The burden falls on the remote sellers who will have to compute, collect and remit tax for all 7,600 jurisdictions, compared to an in-state retailer that collects just one tax rate. Second, an e-retailer must eat the difference if a customer fails to remit the correct tax when paying by check--a problem that traditional retailers do not confront. Third, in-state retailers benefit from a wide variety of state and local government services and programs (including tax incentives) that are not available to out-of-state merchants. Fourth, delivery charges on Internet purchases usually exceed the amount of sales tax on those same goods--so the remote seller has no price advantage. There are a number of other problems with this proposed tax scheme, but the bottom line is that we believe this idea is not ready for prime time.

ERA: The recent surge of retailers in the ERA community often cites government affairs initiatives as a primary reason for joining. What's the secret?

McClellan: I don't really think there is a secret. Retailers are in the business to be profitable. Bad actors and potential government action cause uncertainty in the marketplace. Here at ERA, we have pulled together a great team of experts who help educate the industry and advocate on its behalf to calm the waters, so to speak. This team coupled with an issue set designed specifically for e-retailers has been a tremendous draw of late.