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Borders Closing: Why We Need the Amazon Tax

Wednesday, July 20, 2011


I visited Borders bookstore in Cranston’s Garden City Center (GCC) this past weekend. Earlier this year, this bookstore was saved from closure when Borders was able to negotiate a new lease for the store. Unfortunately, GoLocal reported Monday that Borders is going to liquidate all of their stores in Rhode Island. From an economic standpoint this is completely understandable. Places such as amazon.com have much less overhead and offer even more variety of books and other items than you’d find in a book store. Simply put, Borders had lost its competitive advantage without coming up with an answer for its rivals.

This got me thinking.

Are we entering the age of the Net?

If the late 90s saw the influx of dot coms into the marketplace, will the 10s see the decline of brick and mortar stores? In addition to Borders, the story of Hollywood Video and Blockbuster, in my opinion, are forerunners of what’s to come. It won’t be like the old days where a corporate giant would come to a community and kill off the local mom and pop shops. No, the killer in the 10s will base its operations in the realm of the Internet with little overhead, increasing consumer trust, and low, low, low prices compared to their brick and mortar counterparts.

With more and more of our physical lives spent in front of a computer screen, are we headed towards the world characterized in the movie WALL-E? If we are, is it a bad thing?

In some ways, yes, as the lack of physical activity is leading to increased obesity. Increased obesity leads to more numerous health problems commencing at an earlier age. Contrarily, we’re living longer as medical advances continue to supplement our inability to manage our health effectively. In other words, had we lived like we do today even 100 years ago, I’m sure our life spans would be less than our contemporaries of that era. So I do believe we are entering into unchartered territory with daily life more connected to a computer screen than anything physical.

On the other hand, it’s not all doom and gloom and I am not intending to say that the Internet is evil. Places such as GoLocal, Wikipedia, local blogs, have allowed you and I to get information faster and from more sources than we could have ever imagined at any other time in history. Need to find out the score of an international soccer game? This was pretty impossible in the 80s unless you had a friend living in the country where the game was played. In the 90s you could go to ESPNNET.SPORTSZONE.COM (ESPN.COM today) and trudge through their site to find what you were looking for…hopefully. But today, there are a number of internet sources to get any kind of information you want. Anything.

All you have to do is type and click. This has made us into better shoppers, more informed patients, and I’d even guess a more tolerant society as we see “other” people are not boogiemen with black capes.

So how does this affect the Garden City Center and other local malls?

Getting back to the Garden City Center, after leaving Borders I looked at the various offices that were available for lease. Stores have come and gone recently with more going than coming. Remember when Circuit City proudly lit up your ride down Route 2? No more and from what I could see, nothing had replaced it.

On the other hand, if you visit some of the stores at the other end of the GCC you’ll experience something different. These stores have more of a boutique feel and from what I could tell seemed to be doing more than subsisting. It seems that the market for higher profile products is still being purchased by foot consumers in quantities large enough to sustain brick and mortar stores whereas many lower priced items such as books, DVDs, and music are being purchased online.

If this is the case, than GCC will continue to serve a specific population but beginning with the old Circuit City location to the OfficeMax those types of stores may experience significant issues. Perhaps the net will not destroy every company like Borders but it’s hard to see what companies the GCC and other local malls can attract that will be viable for the long term.

Taxing Internet purchases…federal legislation required

You may find it odd that this Republican is suggesting the following but we need to tax Internet providers on a national level. Back in 2009 Rhode Island joined New York in taxing Internet retailers who generated more than $5,000 in sales through sales affiliates (the Amazon tax). Immediately after passage, Amazon cut ties with affiliates in Rhode Island which to any observer should not come as a surprise. If Amazon could find a tax friendly state for its affiliates they have every right to do so, that’s how capitalism works.

However, the long term problem I see is that while these large Internet providers are providing goods and services at a lower price they are doing so at the cost of local businesses without the state benefiting by and large. While brick and mortar stores collect the local sales tax their competitors do not, giving their competitors the appearance of being ‘cheaper.’

This simply isn’t fair to all businesses and above all else, the market should be fair to individual players.
Unfortunately, Rhode Island found out the hard way that enacting a law such as the one in 2009 is not going to solve the problem. We need a clearly defined national sales tax system for Internet purchases that is standard across the 50 states. States can charge whatever sales tax they want, but if our economy’s base is headed towards cyberspace then we need a way to replace business sales tax revenues lost through closures of shops like Borders.

Will such measures help restore the competitive balance between Internet and brick and mortar businesses? Probably not and that isn’t something the states or federal government should be concerned about. Instead, politicians should look to address the lack of standardized collection of sales tax so that states are not losing millions of dollars in sales tax while passing along budget deficits to everyday America.

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Don Roach is a member of the Young Republicans. He can be reached at [email protected]


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