×

Once registered, you can:

  • - Read additional free articles each month
  • - Comment on articles and featured creative work
  • - Get our curated newsletters delivered to your inbox

By registering you agree to our privacy policy, terms & conditions and to receive occasional emails from Ad Age. You may unsubscribe at any time.

Are you a print subscriber? Activate your account.

DIRECT MAILERS FACE STIFFER TAX THREAT BUMPERS BILL HAS NEW TEETH, THANKS TO COURT

By Published on .

WASHINGTON-A long-awaited tax bill came due for the $200 billion direct marketing industry last week when a key U.S. senator introduced legislation that would require marketers to collect sales tax on all mail transactions.

If adopted, the measure would affect some $40 billion in direct mail sales, according to the Direct Marketing Association, the leading opponent of the proposal from Sen. Dale Bumpers (D., Ark.,), chairman of the Senate's Committee on Small Business.

The senator introduced a similar measure in 1988, but it went nowhere. Four years later, the U.S. Supreme Court eliminated a major obstacle to the taxation, and, in effect, invitedCongress to address the matter. Sen. Bumpers and friends accepted that invitation last week.

"The intent of this bill is not to injure the mail-order industry," Sen. Bumpers said. "It is designed to ensure that mail-order companies and Main Street retailers compete on an equal basis, with neither side receiving an undue advantage."

DMA President Jonah Gitlitz said the administrative burden would force some mail-order marketers out of business and others to familiarize themselves with 6,100 tax rates for 45 states (five levy no sales tax) and the District of Columbia, not to mention exemptions and compliance rules.

"The enormous cost of collection would result in customer service cutbacks, employee layoffs and possi ble bankruptcy," Mr. Gitlitz said. "An undue burden would be placed on busi nesses because collection costs would be six to seven times greater for direct marketers than for Main Street retailers."

The DMA and Sen. Bumpers couldn't even agree on how much potential tax revenue states now lose, even though some direct mail marketers already collect and remit such taxes.

The DMA put the figure at about $1.4 billion, Sen. Bumpers at more

Most Popular
In this article: