Stores Closed by Online Competition Affect Community Finances

J.C. Penney announced it will close five stores in Mississippi communities – Columbus, Corinth, Greenville, Meridian, and Oxford. Earlier Sears announced three closures in Columbus, Jackson, and McComb, with more to come. Even Wal-Mart has closed stores, in Belmont, Mantachie, Sardis, Walnut, Derma and Nettleton.

Two years ago Radio Shack closed 20 stores in Mississippi, in Jackson, Hattiesburg, Meridian, Cleveland, Biloxi, Gulfport, Ocean Springs, Waveland, Vicksburg, Tupelo, West Point, Grenada, Greenville, Corinth, Greenwood, Laurel and Natchez.

“Brick-and-mortar stores are suffering due to competition from online sales, and the closures just keeping coming,” reads a March headline at TheMotleyFool.com. “Last year took a devastating toll on the retail industry, and the carnage will continue in 2017,” the story reported. “A number of chains will likely not survive the year, and many that do will finish 2017 smaller than before.”

“Sporting goods stores are down for the count,” begins a story in USA Today. “The scourge of insolvency is sweeping through the sector as online sellers gain the upper hand over yet another corner of retail just recently dominated by big-box chains, specialty stores and mom-and-pop shops.”

As if individual stores closures aren’t enough, “Store closures will push 30% of US malls to the brink of death,” Business Insider reported. “Since the start of the year, more than 1,500 store closures have been announced by retailers including JCPenney, Macy’s, Sears, American Apparel, The Limited, and Abercrombie & Fitch. Most of the closures will happen over the next several months.

Guess what all these brick-and-mortar Mississippi stores had in common?  They all charged and collected sales taxes. While their closure reduces state sales tax collections, they really hit tax revenues in affected municipalities…especially when you add in lost property taxes.

Local communities could at least recoup taxes lost to Internet sales if the state collected use taxes from online vendors and shared them with communities. Lt. Gov. Tate Reeves killed the online tax bill that passed the House.

Alabama passed a bill to collect taxes on online sales in 2015. However, it provided incentives for online vendors to voluntarily collect taxes. Today, 85 retailers with no stores or physical presence in Alabama have signed up for the “Simplified Sellers Use Tax” program, according to AL.com. Mississippi’s bill did not use Alabama’s approach, but chose a mandatory approach that has been outlawed by the U.S. Supreme Court.

However, mayors in affected communities shouldn’t worry, because their state legislators surely don’t. At least that’s what many mayors have come to believe. “They don’t (unprintable language),” said one mayor.

Not only do legislators not pass most proposals mayors request, they continue to make decisions that push costs down to the local level.

“I am not sure anyone in the legislature understands the feelings of numerous mayors and supervisors as to concerns facing them on a daily basis,” said another mayor.

Ever-increasing online sales driving brick-and-mortar stores out of business is just one of several systemic changes affecting how communities finance government. At some point, the growing number of perturbed mayors, and other local officials, will get legislators, or their opponents, to pay attention.

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