Thank you for visiting our website. I can thank you because you are here. Whether you’ve checked our directory, calendar of events, or visited this blog, we appreciate your interest and hope you’ve continued to discover plenty of useful content in every visit. But within the wide-ranging reach “Buy,” “Act,” and “Think” are a number of ideas and suggestions to better drive your individual actions, improve your choices, and bring our statewide independent business community ever closer together. We strive to do our very best.

If you were able to attend any of our events this year, you could see first-hand the efforts of our tiny staff supported by an army of local-minded volunteers. The enthusiasm surrounding our mission definitely propels our efforts and inspires hope for more events with greater geographical diversity in the future.

Despite tough economic times, Utah remains a top-tier state in which to do business and our universities continue to rank the highest for the creation of startup companies. Entrepreneurship thrives. But our locally owned businesses continue to feel the pressure of competition from big boxes. Whether or not we are emerging from recession, consumers are constantly faced with some important decisions when it comes to spending their hard-earned money. Granted, The U.S. Department of Commerce’s Bureau of Economic Analysis said that “In October 2011, real disposable personal income increased 0.3 percent.” So that’s cool.

But the choice remains as to where to spend that disposable income. 

Through these winter months, let’s remember to check with our friends, to check the Local First partner directory, and to look for options that support our community and strengthen our local economy first. That can mean dispatching with the “convenience” of “one-stop shopping” (that studies have shown lure consumers into purchasing more than what they intended to begin with) and planning a shopping list and efficient route that supports local businesses. For holiday shopping, a good plan can not only limit total gas consumption, it can save the hapless wandering around department store in search of some random present.

Dozens of our partners stepped forward during Local First week to offer discount coupons for our friends and followers of Local First. There was great media coverage of the event and some solid exposure for independent businesses throughout the state. In fact, notes Local First’s Marketing Assistant Kristen Lavelett, “We achieved hefty statewide reach from our little South Salt Lake Office by employing the power of the internet.” The Gift Shift Coupon was a great opportunity to patronize an independent business and receive the benefit of some exclusive discounts. Just for thinking locally.

Moving forward, we encourage you keep those enthusiastic business owners in mind for all your needs, whether making purchases for yourself or as gifts. They love talking about their businesses which are their passions, and they love sharing ideas about other ways to make local choices.

Stay tuned for some more locally tuned dialogue and, I hope, some fantastic gift ideas.

--Andrew Dash Gillman

Day 3: The Final Day

It reads ominously: Day 3. Like the third day in a movie after the alien ship first occupies the expanses of the sky over the city or a virus takes hold of some remote Middlesex, Village, or Farm. Day three. Indeed there was a bit of indecision and anxiety hanging over the day as it was to be the last of our whirlwind tour through parts of southern Utah. In fact, we would only get to make a few quick stops in Boulder, Escalante, and Bryce Canyon City before finding ourselves obliged to make haste for home in time for our evening responsibilities.

Each place had its unique identity, but still felt tied to the greater whole: the unifying spirit of Local First Utah’s mission. Nowhere, perhaps, are our ideals better exemplified than in Boulder, where we awoke to a hot late spring sun.

More precisely, we awoke about seven miles down the Burr Trail, where we had securely tucked our camp the night before. We wearily found our way back to the town and set our sights on the Burr Trail Trading Post, where the coffee we drank was among the few (out of necessity) non-local ingredients (though it was appropriately sourced from Logan’s Caffe Ibis). The many crafts, essential oils, and miscellaneous goods, wares, sundries, and what-have-yous were largely all products of the community’s drive and imagination. It was certainly geared toward a tourist economy, yet it managed to retain an authenticity and tie to the people who call the high elevations of Boulder their home.

For more on the community of Boulder and, specifically, Alyssa Thompson’s Boulder Mountain Baking, please see a digital copy of the Fall 2011 edition of edible Wasatch or pick up a printed copy at one of the magazine’s advertisers.

After paying our respects at the Anasazi State Park Museum, we began our ascent up beautiful Scenic Byway 12, which soon wound its way onto a narrow ridge called The Hogback overlooking the canyons of Grand Staircase-Escalante National Monument and the Calf Creek Recreation Area. We briefly stopped by the Kiva Koffeehouse, constructed of locally sourced materials and tucked ecologically into the hillside, but soon departed, making our way along the several more extraordinary miles of the monument.

We arrived in the 1876 Mormon outpost settlement of Escalante and held a few more excellent conversations that solidified two realities: The first is that Local First Utah had a presence but there remained a divide between the local economy and the tourist economy, with no bridge between them demonstrating to the tourist economy the importance of their choices and their spending to the towns.

The second reality is that Local First Utah does want to return, but with a plan to help enable the remote areas to harness tools and resources to act independently but with the guidance of the central organization.

Once again, our limited staff and budget inhibits our dreams and our mobility, but we remain a truly statewide organization. Each community demonstrated the kind of unity and passion that we have come to expect of our unique places in all corners of our vast state, unified by common industriousness, independence, and will to persevere. The Utah family of small, locally owned businesses partnered with Local First Utah is one of the biggest networks of its kind for a reason: Utah chooses local out of respect for our state’s heritage and with the desire to see our neighbors and friends succeed.

As we passed through Panguitch on to U.S. Highway 89 en route to rejoining the masses traversing the land across Interstate 15, some of the heavy rain clouds characteristic of this year’s peculiar spring began to darken the sky. We were driving home, back into the rain and weather that was delaying the growth and green of springtime earlier this year. We realized that it had stayed clear and calm throughout our visit in Southern Utah, a place that had also seen unseasonably late and heavy precipitation.

We wished to linger longer and continue the conversation, but the timing was right. When we could return, we did not know. There is work now to be done back at the office, including, but not limited to, organizing case studies and research to further back up our mission.

But what else? How else can and should Local First Utah have an impact? The intrepid residents of Boulder and similar communities throughout Utah are increasingly remembering and demonstrating just how much is possible locally—from the food system to local energy and services, the self-sufficiency of previous generations is being reclaimed.

While our modern conveniences, manufactures, and diversions are clearly the product of the global supply chain, sent overseas for cheaper labor, lower overhead, and fewer regulations, the very least we can do is support our local vendors of these wares, ask for the best, and share what we have. Some things will never be made locally, but almost everything can be purchased from a local business. So what aren’t we purchasing locally that we can? What else are we capable of doing here that we haven’t been?

The real message of Local First Utah is independence through a thriving, energetic, and unified network of locally owned businesses and services. How can you keep more money—whether in any of Utah’s stunning southern outposts or in the sprawl of the Wasatch Front—local? Please share your thoughts below. Oh, and we’ll see you at Celebrate the Bounty!

--By Andrew Dash Gillman

Story Highlights:

• Independent business and chains are united on the issue and are at a disadvantage to solely online retailers who claim lack of physical presence or “nexus” (further defined herein) justifies their not collecting sales taxes. But that gives them a 6 to 10 percent advantage over retailers that do collect sales taxes.
  
  
• Bookseller Betsy Burton highlights the matter of fairness in the issue.
  
  
• The fact online retailers don’t collect sales taxes actually do not make them go away, effectively transferring the liability for those taxes to the consumers.
  
  
• Pete Ashdown points to the Constitution to show only a federal solution can correct the disparity but alludes to the current political climate to show that Washington D.C. is not eager right now to address tax reform, especially if it involves raising them in any way.
  
  
• Convenience is the modus operandi of the internet, a driving force of that retail arena.
  
  
• Utah alone lost $180 million in uncollected taxes last year.
  
  
• If the government fails to address the issue, consumers can do their part to help local businesses, the local economy, and the society and infrastructure of their community by choosing to spend more of their dollars locally, whether at physical stores or their websites, ensuring that sales taxes are properly collected.

Introduction

Okay. A quick google search of the question of internet taxation doesn’t reveal all that much so you think, “maybe this whole ‘eFairness: Internet Taxation Forum’ isn’t for me.” But what was a hard sell on paper or on your computer screen was in person an engaging, even lively exchange on a rather complicated question. All that’s left to do here is recreate that dialogue in a way that captures its energy and relevance to everyone. And oh yeah. This affects everyone.

It is rare, but both chains and independently owned businesses have come together to address the issue of internet taxation because both kinds of businesses (and, indeed, all consumers) have a stake in the issue. Sales taxes are, in and of themselves controversial. But if we assume for a moment that sales taxes are a reality of American commerce (a challengeable assumption), then we ask whether all businesses shouldn’t be obliged to collect them with or without a physical presence (nexus) in a specific state.

Specific geographical presence matters because taxes not only vary (from 6 to 10 percent) from state-to-state, they also vary among counties and municipalities. The conflict has its origins in mail-order businesses who sought being excused from sales taxes for that very reason. When internet retails first took the same exemption no one took notice, but now that online sales are in the hundreds of billions and hundreds of millions of dollars in sales taxes are going uncollected, struggling municipalities are noticing.

Ultimately, there’s a two-way street running in and out of the question. The answer, in brief, seeks for 1) a level playing field wherein sales taxes are collected on every purchase, whether online or in a physical store and 2) challenging brick-and-mortar stores to bolster their internet presence in order to offer the same convenience of online shopping. Ultimately, one critical aspect of the discussion boiled down to that question of physical presence, as summed up by that one word: nexus. But more on that later. Back to the beginning, on the fair 18^th floor of the Zions Bank building in downtown Salt Lake, where we lay our scene.

The Discussion Begins and Panelists Offer Opening Thoughts     

Following a presentation of Earth Village’s video presentation showcasing the mission of Local First Utah, the esteemed master of ceremony, Robert Mayer, a professor from the University of Utah Department of Family and Consumer Studies, offered the panelists (click for panelist profiles, requires Adobe Reader) an opportunity to offer some opening thoughts. In terms of the total discussion, the opening thoughts are quite extensive, and convey much of the breadth of the whole discussion.

Bookseller Betsy Burton insists that there are no rational or legal reasons for the disparity: “This is, more than anything else, a fairness issue. Everybody is supposed to collect sales tax. And to pick one segment of the retail population and say that one segment doesn’t have to collect sales tax and the rest of us do is not only unfair, it seems to me to be un-American, sort of anti-competition and anti-capitalism.” Ultimately, Ms. Burton’s two broad talking points have pointed benefits for the economy: “If we collect from everyone equally we can either help to address our deficit or even more interestingly we could actually lower sales tax for everybody,” she says.

Dave Davis echoes Burton’s concern of fairness for both local and national merchants who are pitted against online retailers using loopholes in the tax code based upon an apparent lack of physical presence or nexus. “We don’t want government picking winners and losers,” says Mr. David, adding that another concern not adequately appreciated (indeed, not at all in most cases) by consumers is that since online retailers don’t provide a collection service for sales taxes on things purchased, they are in essence transferring the legal liability for that sales tax to consumers. Both the moderator and Mr. Davis relayed aspects of an anecdote about Scott Matheson Jr. being the only individual to voluntarily send in uncollected sales taxes to the state. In short, liability as a purchaser of goods online doesn’t go away if it isn’t collected, and the state tax commission, so inclined, could audit consumers for failed payment of use taxes for online purchases. It’s no small amount, either. In Utah alone, a study showed $180 million a year in sales taxes goes uncollected. Davis points to education and children’s health insurance as potential benefactors of collected taxes.

Pete Ashdown brought to the discussion a perspective of a business entity not taxed, and one who competes against other entities not taxed. Mr. Ashdown emphasized the internet as a realm driven by convenience, and most consumers when making decisions about email and internet hosting don’t make them based upon whether or not the company is in state. Ultimately, he points to both political and constitutional challenges to levying sales taxes on out-of-state enterprises: the Constitution in Article 1 Section 10, he reads, states that, “No State shall without the Consent of Congress lay any Imposts or Duties on Imports or Exports, except what be absolutely necessary for executing its inspection laws: and the net Produce of all Duties and Imposts, laid by any State…shall be for the Use of the Treasury of the United States.”

So, shows Mr. Ashdown, even if the state did collect such use taxes, it would have to go straight to the federal government. In addition, there is political pushback largely by the Republican Party against the levying of any new taxes or elevated taxes despite the need for deficit reduction. As a result, there can be little hope right now of seeing federal regulations determining internet sales tax, which Ashdown sees as the only way it can be properly handled. Ashdown says the best hope for local retailers is to bolster their inventory and online presence to the point where they can offer the same convenience as online retailers, for those times when consumers are seeking it.

John Ward brought a couple of platforms to the conversation beginning with a relevant analogy in the form of the rise of the use of electronic payment, including credit cards for grocery and gasoline purchases based not necessarily upon economic challenges obliging the use of credit cards, but on convenience and rewards programs associated with their use. As CFO of Harmons, Ward does make the point that grocery shopping hasn’t experienced the same magnitude of migration to the internet, but that it’s gradually coming.

Merchants who wish to comply and collect sales taxes online still face the challenge of juggling dozens of local tax rates. While he’d like to see the state streamline its own sales tax, he agrees with Mr. Ashdown that “a national sales tax that is easy to administer, easy to collect, and easy to remit” is necessary to ensure full compliance. Even if the company looks to bolster its own online should the demand arise, he is pleased to report, “This year alone we’ve put almost $30 million into brick-and-mortar.” At the end of the day, Local First Utah heavily emphasizes and values the experience of engaging in our community through visiting local businesses and establishing working relationships with local business owners and their employees.

Scott Beck of Visit Salt Lake begins by suggesting that “We can all agree that the internet has changed our business model.” He cites the travel agent as a prime example of a kind of business person and business model that has dramatically changed with the conveniences and versatility of the internet. But since internet travel businesses like Expedia.com are an intermediary (a third party bringing together buyer and product, but who doesn’t own the product), there are concerns not about the remittance of taxes, since when a room is sold at a hotel by a website a tax is charged and sent to the locale where the room was sold, but about how the tax is calculated relative to the how much of the total cost of the room is collected for services and fees. From the perspective of his industry, Mr. Beck doesn’t see the sales tax clarification discussion as a matter of “whether, how, or when,” just when. But it has to be easy to understand and implement.

Nexus Defined and the Potential Power of Uncollected Sales Taxes

The discussion that follows goes into some greater detail about the various concerns the panelists brought to the table. The moderator highlights the $180 million in uncollected sales taxes, which Mr. Davis clarifies are solely from online entities who “claim they have no nexus in the state, therefore they have no obligation to collect that sales tax.”

The Utah State Tax Commission simply defines nexus as, “a business has an established presence in Utah. A seller with Utah nexus must collect and pay certain taxes, including sales and use tax.” Nexus is typically interpreted by online retailers to mean if they don’t have a physical presence in a state who define nexus this way, they are not in fact obligated to collect sales taxes (Wal-Mart has an online presence but also nexus in every state, Amazon, the most common example given for their sheer size, does not). But what Mr. Davis shows is that it doesn’t release consumers from the liability to pay. Again, from the Tax Commission: “Use tax is a tax on goods or taxable services purchased for use, storage or other consumption in Utah. Use tax only applies if sales tax is not applicable or if sales tax was not paid at the time of purchase. If you purchase an item from an out-of-state retailer for use in Utah and the retailer does not collect the tax, you must pay the use tax directly to the Tax Commission.”

Thus the joke brought up by the panel about that straight-shooter Matheson, a category into which Mr. Davis included himself, being in the know about the matter. That raises the question as to how many consumers were actually deliberately going online to avoid sales tax, which Davis suggests is likely most true of larger purchases, where seven percent is a significant amount of money. What most of the consumers who are saving that money don’t realize is that just because the retailer doesn’t collect it, as the use tax law shows they are still responsible for it. But clearly the substantial difference gives the online retailer an unfair competitive edge.

Attempting to Level the Playing Field

It’s not to say the whole issue has flown under the radar. Some states have, in fact, been more aggressive on the issue. But simplify, simplify, simplify. It has to be easy for everyone to participate. That would seem to necessitate legislation at the federal level, but many just don’t see it happening. With the question of taxes threatening to derail the federal government on the issue of the national debt ceiling, the question of sales tax reform doesn’t have much elbow room, despite the point that deficit reduction could be addressed by both unremitted sales tax and (arguably, properly) elevated tax rates.

On the other hand, leveling the playing-field may come through the reduction of local use taxes rather than boosting online sales taxes. Mr. Ashdown finds use taxes to be “regressive,” adding that sales taxes “punishes people who are buying food,” something that legislature has debated lifting for years, but has never done. The debate in this year’s legislature, in fact, was to raise the sales tax on food and lower the overall base sales tax, which struck the same chord among community watchdogs, who felt the tax would have the largest impact on low income families, where a few dollars can make a huge difference. Instead, Mr. Ashdown favors “lifting all sales taxes and going more toward an income-related model.”

The moderator raised a political question as to which party will lead the charge into tax reform since it appears that in the short term an answer won’t come out of Washington. Mr. Davis still boils it down to fairness, and even though Ms. Burton chooses to have an online presence for added convenience, she remains at a disadvantage for having to collect sales tax there. Davis goes on to give an example of grey areas between matters of nexus and affiliates (or subsidiaries), the latter of which large online retails use as a loophole to avoid sales tax collections—unless, as has often occurred, a state law is passed obliging the collection, in which case the major online retailers have been known to promptly sever relations and move operations to a more favorable state. In fact, Ms. Burton points out such maneuvering is often blatant, especially with respect to the major players in her industry: “That willingness to bludgeon [competition] and maintain a really unfair advantage is something I think we should all be concerned about.” Ms. Burton’s comments point to the way Local First Utah, and the friends of Local First are able to unite in a common cause with a louder voice to help “Keep Utah Independent” by bolstering our independent business community.

In fact, communities of voices uniting in a common cause at the local level are beginning to have a much greater impact on people’s decision making. And Scott Beck points to online opinion sites becoming the “curators” or “editors” through public consensus, or, “We the People.” The strength of “personal preference by populous” helps (along with editors and critics) to determine what works and what doesn’t, and the good news is that that voice is a very strong champion of the local and the authentic.

The panel proceeded to debate the likely outcome of proposing online sales tax requirements. Mr. Ashdown predicts it would be challenged and go to court, where it would lose, which Mr. Ward echoes. Mr. Davis is more optimistic. He says people are in the process of arguing the breadth of the definition of “nexus,” arguments he believes the states have the opportunity to win.

People just have to get interested in the conversation.

Ms. Burton reiterates an earlier point that the successful generation of online sales taxes will in fact lower the base sales tax rate statewide, which she sees as a conservative goal and issue. Mr. Ashdown reinforces the importance of simply providing value to a consumer.

Ultimately, Mr. Beck doesn’t think there is a government solution and that a level playing field cannot be changed because partisan politics are determined by inherently not level playing fields. But change, he says, happens at the consumer level: “We can spend more of our dollars locally as residents to affect [change] in a real, organic, ground level way that has more impact than what a government agency can do…We as the consumers have the most powerful opportunity to make the change.”

That's what we've been saying all along.

Words and Photos by: Andrew Dash Gillman

PART 1:

The Wall Street Journal posted in October, 2010, that the relentlessness of the economic downturn was keeping small business owners from being able to hire new people and spur economic growth. There is nothing about that statement that doesn’t make sense, but its repercussions seem to be far reaching:  “small businesses, known for jump-starting economies, aren’t upholding their reputation…the forerunners in hiring and growth [they are] the harbingers of recovery.” The economics of such an equation are, well, better left to economists, but is it fair to claim that small business aren’t “upholding their reputation”?

The immediate answer is yes. The Journal doesn’t criticize small businesses for failing to do their part. Small businesses cannot be expected to shoulder the burden of the national economy. Or can they?

The article quotes Stephen P.A. Brown, who is the director of the Center for Business and Economic Research at UNLV, who notes that “‘Consumer income just isn’t back yet.’” Consumer confidence, in other words, is relying upon the presence of jobs. But Brown says something more compelling: “‘A lot of small businesses have direct [contact] with consumers.’” Brown’s point strikes the core of the Local First movement, but gets no further attention in the article, which focuses on data and economics.

There is something not measureable about Brown’s notion, like the hypothetical “util” unit of measurement that accounts for the economically immeasurable aspects of utility and satisfaction gained from the acquisition of goods. All that is quite tangible but not quite quantitative about the experience of shopping locally is the emotional core of Local First Utah. The mission is simple in that Local First seeks to strengthen communities and local economies by promoting, preserving, and protecting local, independently owned businesses throughout Utah.

While that mission is measurable economically in the percentage of money spent that stays in the local community, it is also measurable in neighborhood vitality, including access to goods supplied by local business owners or the opposite: vacant storefronts once inhabited by friends and neighbors.

Thursday, January 6, 2011. Says The Wall Street Journal on small business: “The Future is Brighter in 2011, but Problems Linger.”

Neat.

Sarah E. Needleman, Emily Maltby, and Angus Loten reported that increased consumer spending and an improved credit market may bolster small business, but likely only the healthiest among them. That is a “marginal” improvement, at best, but the increased confidence may at the very least allow merchants to slightly raise prices from the rock-bottom points established in the valley of recession to try and lure in consumers.

That trend proved true in January throughout the United States, but not in Utah, according to The Salt Lake Tribune from February 18—at least for the time. That trend should change in Utah if gas prices increase as expected, along with the increase in price of food and raw materials.

Of course, wages have remained low and a corresponding increase in unemployment claims nationwide are not encouraging signs, even in Utah where jobless claims have actually decreased in one of the few states that still has a funded unemployment coffer.

Whew.

It’s a lot to process. With luck, some of it can be worked out in Part 2 of this discussion.

PART 2:

What on earth is anyone, whether an individual or a struggling small business to do with this information?

On the one hand, Utah has proven resilient, and bucked some of the trends that have devastated other states’ economies. Maybe it’s our pioneer heritage and entrepreneurial spirit, but (notable and tragic exceptions notwithstanding) business owners have hung on in desperate times. On the other hand, no one is exempt, and that is how an individual can actually take action. While the big boxes do offer access to relatively cheap consumer goods, everyone has to ask himself or herself whether or not we need all these goods. To be sure, the layouts of these stores are designed to lure consumers in walking out with more they intended, but they also are completely vacant of any emotional resonance, replacing knowledgeable, passionate individuals with a vested interest in the goods with oversized, yellow smiley faces.

Local First Utah is about encouraging and empowering individuals to take as much of their business and buying power to the people who care about their products and their customers. It’s about feeling confident walking away from a conversation with a business owner. It’s about real community.

An economist once argued that Sam Walton created more jobs than any other American entrepreneur in history. Unfortunately, he may well have been right. But it seems to have come at the expense of a skilled American labor force, and a manufacturing industry exported oversees, the gradual process of which has worsened our country’s dependence upon fossil fuels and promulgated the artifice of the American dream through unnecessary access to consumer goods through free trade that protects America’s interests at the expense of other countries.

Alas, the best we can do, in many instances, is support the local purveyor of global goods. That’s okay! We can’t just severe the supply line, but if the goods are already made out of the country, why send the profits out of state? Happily, in many other instances, truly local choices can be made. That is the light at the end of the tunnel, and a light that is getting increasingly brighter. Some of the related questions left unanswered herein, as well as best practices for acting on behalf of the preservation of our cultural vitality will be addressed in this blog moving forward.

There is a lot of gloom and despair hanging over this rant. But small business in Utah, a direct bloodline of the state’s pioneer heritage, has always been supported by hope and joy, the fuel of the human spirit. In every exchange there is choice. Local First Utah reveals the choices that can be made locally, and in doing so preserves the independent spirit of our industrious state.

Author: Andrew Dash Gillman