Small businesses have to compete with online vendors
Hope Howard, Jonathan Mitchell and Grace Lett
Smooth jazz plays in the background as Bex Oliger sits at the front table of her store, Hillcreek Yarn Shoppe. Yarn of all types is splayed across the walls. Dark green, deep purple and vibrant yellow meld together into one giant spool of color as Oliger proudly displays some of her most recent purchases.
Oliger’s mother has had several books published, and at one point, seven members of the family worked for the business. Weaving and knitting runs in the family. Their livelihood is built on family bonds and genuine passion for the craft, but things have changed over the past three years.
The rise of major online shopping retailors have left small business owners like Oliger at a severe disadvantage when it comes to success in such a competitive market.
“I've actually had customers in my store looking through a book to see if they really want it and make sure it's got the patterns they want. In my store they'll sit there and order it on Amazon,” Oliger said.
Although Boone County’s combined sales tax is at an average percentage, the combined tax rate is significantly higher in Columbia. Oliger’s yarn shop inside the Columbia city limits has a combined sales tax set at 8.475 percent.
“I believe higher sales taxes makes the city of Columbia not as competitive for consumers to go buy stuff as other counties that have lower sales tax,” Paden Squires, a Certified Public Accountant and accounting professor at Columbia College, said.
It is difficult for Oliger to make ends meet because of the high taxes imposed on local small businesses. She struggles on a monthly basis to find ways to pay her bills while trying to overcome her much larger competitors.
“That's the biggest contributor to the decline of brick and mortar stores,” Oliger said. “You see them all over the place are closing up because they just can't compete with the online discounters and free shipping.”
In an attempt to remedy the issue, Amazon will start collecting state sales tax in Columbia in January of 2018. Yet they still won’t obtain city or county taxes for goods that are sold in Missouri.
For small business owners like Oliger, the new tax may be a way to finally even the playing field, but until it’s passed she’ll have to continue dealing with the loss of sales to outside companies.
“If they can buy the same item online and not have to pay tax on it or shipping, then there's no motivation for them to walk into a store,” Oliger said.
As online shopping continues to spike, small business owners must adapt to survive, or be left behind. Samantha Dent, a business and tax advisor for Accounting Plus, said small businesses may have to increase their online presence.
“A lot of times it isn't that you need everything online, but just to say ‘Hey, we are here! We have an online website,’” Dent said. “It’s kind of like you have to have a phone number, you have to have a website. You don't have to have everything online, but maybe list the things you have in store.”
Sales tax accounts for such a large portion of the state’s budget that if tax on online purchases were implemented, it could generate large amounts of revenue for the state.
“It’s roughly $3 billion of general revenue that come from sales tax,” said Justin Alferman, vice chairman of the Budget Committee. “So that’s a significant amount of money that is remitted to the state.”
The future is full of uncertainty for small business owners like Oliger, but the state will get its money one way or another.