Michigan retailers say they are unable to pass along the majority of cost increases on the goods they purchase. Page 3
Small businesses increasingly are becoming the targets of cyber thugs out to steal credit card and other data. Page 5
Sharing and Caring
Retailing is about sharing life experiences, so there was no excuse for not observing the 10-year anniversary of 9-11. Page 7
® October 2011 Vol. 36 No. 5
‘Retail Means Jobs’ campaign to boost industry’s advocacy Retailing supports nearly one in four American jobs, according to new research that will serve as the focus of a multi-year, national campaign to strengthen retail’s influence on federal and state policymaking. In Michigan, that means retail supports more than 1.25 million jobs directly or indirectly, according to researchers at PricewaterhouseCoopers LLP, a Big Four international accountancy and professional services firm. The National Retail Federation commissioned the study and is leading the campaign and all its pieces: lobbying, grassroots involvement, advertising, social media and public relations. The new effort is designed “to make sure lawmakers know precisely how vital our industry is to the economic recovery and to ensure they support a pro-retail, pro-jobs agenda,” said NRF President and CEO Matthew Shay. The campaign’s overall success depends on state associations, such as Michigan Retailers Association, and individual retailers to communicate the message to elected officials. Other figures generated by the research: • Retailers paid 17 percent — $1.49 trillion — of the nation’s total wages, salaries and benefits in 2009. • Retail’s impact on the nation’s Gross Domestic Product was $2.48 trillion — nearly one-fifth of total GDP for 2009. • Retailers account for 11.9 percent — 3.6 million — of all business establishments in the nation. • 95 percent of all retailers are small business owners, with more than half of all retail firms employing fewer than five workers. • Retail employs at least 50,000 workers in 85 percent of all congressional districts.
The official publication of the Michigan Retailers Association
Lawmakers take up sales tax issue Landmark legislation to level the playing field between Michigan businesses and out-of-state online mer-
chants has begun working its way through the Michigan Legislature. Standing alongside members of
MRA’s James P. Hallan urges lawmakers to level the playing field for Michigan businesses, as board chair Barb Stein looks on. Photo by David Olds
Fond memories will last after former HQ is gone by Jean B. Eggemeyer
A sprawling Victorian-era building in downtown Lansing holds memories of one of the Michigan Retailers Association’s most exciting periods of growth. Built in the 1890s by a successful plumber, the house at 221 North Pine Street would become, nearly a century later, the first headquarters owned by MRA. Formed in 1940, the Association and its professional staff worked out of a series of leased locations for its first 40-plus years. By the early 1980s, MRA had reached the point where it made sense from a financial and branding sense to
add an important real estate asset to the books. “It was a significant step for the Association,” said MRA President and Chief Executive Officer James P. Hallan, who had not yet joined MRA’ s staff. Larry Meyer, who was president and CEO at the time, began looking for suitable locations close to Lansing’s downtown retail district and the Capitol that could hold the Association’s growing staff. The employees were housed in two separate rented office spaces: one in downtown Lansing and the other, housing the insurance department, in northwest Lansing. “Strategically, we wanted to bring the two operations together,” explained Meyer. The large but somewhat dilapidated house on Pine, just two blocks northwest of the Capitol, came on Continued on page 4
the Michigan Retailers Association, State Representatives Eileen Kowall and Jim Ananich announced the introduction of the Michigan Main Street Fairness Act, a bipartisan legislative package that protects job makers across the state by closing a sales tax collection loophole that puts Michigan businesses at risk. “I introduced the Main Street Fairness Act to level the playing field between local businesses and out-of-state Internet retailers,” said Rep. Kowall (RWhite Lake Township) at a September 20 news conference in the state Capitol. “Closing this loophole will eliminate the competitive disadvantage that is holding back local businesses.” “Michigan has the best workers and businesses in the world, but they won’t be able to succeed unless they can compete on a level playing field,” said Rep. Ananich (D-Flint). “Democrats and Republicans should be able to agree that closing this loophole will protect Michigan jobs and help get people back to work.” MRA President and CEO James P. Hallan, board chair Barb Stein and board member Dan Marshall participated in the news conference to emphasize the importance of the issue to Michigan retailers and Continued on page 8
Youth work hours bill passes House The Michigan House has approved legislation creating a simpler process for businesses to determine how many hours a minor in school can be employed. House Bill 4732, which won unanimous approval on September 7, would allow businesses to employ 16- and 17-year-olds up to 24 hours per week during any week that school is in session, and up to an average of 8 hours per day in one week. Michigan’s current law creates a cap of 48 hours combined for both school and work in a week while school is in session. The formula is confusing and unwieldy for employers. The measure then moved to the Senate.
Rare honor recognizes outstanding director by James P. Hallan, MRA President and Chief Executive Officer It’s only happened once before in MRA’s 71-year history, which shows you what the Board of Directors thinks about the job D. Larry Sherman has done for this Association. As Mr. Sherman prepared to leave the board this summer after 30 years of service, his board colleagues bestowed the title of “Board Member Emeritus” on him. Very simply, it means they consider him a part of the board for life. This heartfelt action recognizes the former Birmingham footwear retailer’s “extraordinary leadership” over three decades serving as a board officer and
director. He has served at various times as chairman, treasurer, chair of the workers’ compensation insurance program (of which he was a founding member) and chair of the Michigan Retailers Foundation committee that led a successful drive to greatly expand the scholarship D. Larry Sherman program. Oh, and he also found time in there to serve as president of the Michigan Shoe Association
Stein re-elected board chair
Barb Stein, owner-operator of Great Northern Trading Co. in Rockford, has been re-elected chair of the MRA Board of Directors for a second oneyear term. Dan Marshall, president of Marshall Music Co. in Lansing, was reelected chair of the Retailers Mutual Insurance Company Board of Directors, also for a second one-year term. Both were reBarb Stein elected at the August 23 board meetings held in connection with the organizations’ annual membership meetings in Lansing. At the MRA Annual Meeting, members re-electDan Marshall ed Marshall to the MRA board along with James Walsh, adjunct professor of finance at Grand Valley State University and retired Retail By Norm Feuti
chief financial officer of Meijer, Inc. They also elected Becky Beauchine Kulka, owner of Becky Beauchine Kulka Diamonds and Fine Jewelry in Okemos. She had been a member of the board of Michigan Retailers Services, Inc., the wholly owned subsidiary of MRA, since 2007 and also serves as president of the Michigan Jewelers Association. At the Retailers Mutual meeting, policyholders re-elected: Tom Ungrodt, president and chief executive officer of Ideation, Inc. in Ann Arbor; Peter Sobelton, owner-partner in several retail property companies in downtown Birmingham and former owner of two retail businesses; and Rod Phillips, owner of Country Casuals in Petoskey. Directors serve three-year terms. In addition, the MRA board named Bo Brines, owner and president of Little Forks Outfitters in downtown Midland, to the board of directors of Michigan Retailers Services, Inc. Brines has been a member of the Midland DDA since 2001 and is a former president of the Midland Downtown Business Association.
Board of Directors: Barb Stein
Chair Great Northern Trading Co., Rockford
James P. Hallan
President and CEO Michigan Retailers Association
and the National Shoe Retailers Association, as well as in various capacities in his beloved downtown Birmingham. Mr. Sherman has always led by example, whether it was providing sound financial and management advice to MRA’s professional staff or personally endowing two legacy scholarships (one in the name of his parents, Fred and Lillian Sherman, who started him on his retailing career). I first met Larry when I joined MRA in 1985. Besides family, retail was his passion and he consistently asked the tough, probing questions in order to make Michigan Retailers the best association in the country. Moreover, he always possessed an uncanny ability to grasp complex issues and helped craft forward-thinking solutions. Without question, Michigan Retailers is a stronger organization because we were able to be a part of his life. His counsel and leadership were invaluable to this organization. And along the way, we became fast friends and enjoyed a few rounds of golf together. On behalf of the board and the entire membership, Larry, we thank you for a job exceedingly well done!
Sarasin promoted, staff reorganized
Board Member Emeritus
Jean Sarasin has become executive vice president and chief operating officer, under a management reorganization announced by President and CEO James P. Hallan. Continued on page 6
Vice Chair Ideation, Ann Arbor
Peter R. Sobelton Treasurer Birmingham
Secretary Michigan Retailers Association
Joe Swanson Past Chair Target Corp.
Becky Beauchine Kulka
Becky Beauchine Kulka Diamonds and Fine Jewelry, Okemos
Marshall Music Company, Lansing
Orin Mazzoni, Jr.
Orin Jewelers, Garden City
Joseph McCurry Dovetail Alliance
Brandon Tire & Battery, Ortonville
R.D. (Dan) Musser III
Grand Hotel, Mackinac Island
John Smythe Lansing
Meijer, Inc., Grand Rapids
D. Larry Sherman
Michigan Retailers Services, Inc. Board of Directors: Bo Brines Little Forks Outfitters, Midland
Brian Ducharme AT&T
James P. Hallan Thomas B. Scott Publisher
Publication Office: 603 South Washington Avenue Lansing, MI 48933 517.372.5656 or 800.366.3699 Fax: 517.372.1303 www.retailers.com www.retailersmutual.com
Michigan Retailer (USPS 345-780, ISSN 0889-0439) is published in February, April, June, August, October and December for $20 per year by Michigan Retailers Association, 603 South Washington Ave., Lansing, MI 48933. Subscription fees are automatically included in the Michigan Retailers Asociation membership dues. Periodical postage paid at Lansing, Michigan. POSTMASTER: Send address changes to 603 South Washington Ave., Lansing, MI 48933. The Michigan Retailer may be recycled with other white office paper.
Rising costs put squeeze on Michigan retailers last year, while 29 percent recorded declines and 25 percent saw no change. The results create a seasonally adjusted performance index of 55.9, up from 53.6 in July and 52.1 in June. Index values above 50 generally indicate an increase in overall retail activity. Looking forward, 49 percent of retailers expect sales during September–November to increase over the
same period last year, while 15 percent project a decrease and 36 percent no change. That puts the seasonally adjusted outlook index at 61.1, down from 74.5 in July and 63.7 in June. Nationally, the U.S. Commerce Department reported that retail sales were stagnant in August, rising only 0.1 percent. State sales tax receipts totaled $633.3 million in August, up 8.0 per-
10 -11 09-10
cent from a year ago, and year-todate sales tax collections are 7.5 percent above last year’s level. Complete results of this month’s Michigan Retail Index—including data on sales, inventory, prices, promotions and hiring—are available at www. retailers.com/mra/news/michiganretail-index.html. The website includes figures dating back to July 1994.
More than 75 percent of Michigan retailers say they are unable in the current marketplace to pass along the majority of cost increases on the goods they purchase, according to the latest Michigan Retail Index survey conducted by Michigan Retailers Association (MRA) and the Federal Reserve Bank of Chicago. Forty-two percent said they are unable to pass along any cost increases, while 17 percent said they are able to increase prices to offset all of the rising costs of merchandise. Thirty-four percent reported they can pass along less than half of increased costs and 8 percent said they can pass along most, but not all, of their higher costs. “Most Michigan retailers continue to be caught between rising costs of merchandise and a highly competitive marketplace that prevents them from raising their prices,” said MRA President and CEO James P. Hallan. “While that may be good news for consumers in the short term, it’s not sustainable for already strained retail businesses.” The Michigan Retail Index for August found that 46 percent of retailers increased sales over the same month
Seasonally adjusted diffusion index, calculated by adding the percent of respondents indicating increased sales and half the percent indicating no change, and then seasonally adjusting the result using the U.S. Census Bureau’s X-11 Seasonal Adjustment procedure. Index values above 50 generally indicate an increase in activity, while values below 50 indicate a decrease.
Be sure to complete your online survey each month!
Fond memories will remain after former HQ is gone Continued from page 1
the market and caught his attention. Edward Jones, a gift store owner and MRA board chairman at the time, summed up the decision to buy 221 North Pine Street simply: “The former facilities had outgrown their purpose and this opportunity came along and we grabbed it.” “It was a time of significant growth for the association and we also wanted room to expand,” Meyer added. “When we bought the property we employed 15 people. Within a decade we had close to 40 employees. The 221 building was the foundation from which we could build the organization.” Moving on The organization’s growth during the 1980s and ’90s into the nation’s largest state trade association of general merchandise retailers brought back the space problems of the past. MRA staff began working in several properties next door and around the corner from 221. When MRA relocated to its current headquarters building southeast of the Capitol in 1999 — in order to bring everyone back under one roof and accommodate future growth — the 221 North Pine Street building was rented out as office property.
At first the Association was able to find tenants, but as the economy deteriorated and the Lansing office market weakened, it became more and more difficult to lease. As the building aged, the minor inconveniences turned to major problems — most recently an “antique” boiler system that burst. Replacing the system before winter was pegged at more than $25,000. “The costs to maintain an old, vacant building became increasingly expensive and, with the broken boiler, asbestos abatement issues and other problems, the Board of Directors and management made the decision to take it down,” said Hallan. “It was the right decision, but not an easy one to make,” he added. A property committee appointed by the board to look into the costs of further renovation and repair versus demolition advised the board this past summer to take the later tack. The board then voted to have the building razed. At press time, work was expected to be completed in October or early November. “The 221 building served us well, with its easy access to the Capitol and on-site parking, but, unfortunately, its
Offer Gift Cards, Increase Sales.
useful life had ended,” said Hallan. Memories remain Jean Sarasin, MRA executive vice president and chief operating officer, recalled many milestones the association celebrated in the 221 building: the first month of $1 million in merchant sales through the credit card processing service (MRA now processes more than $2 million a day); the conversion from paper sales drafts to electronic processing; and implementing the Qantel computer system that allowed staff to move accounting and membership services from manual processes to computer. After the decision was made to buy the 221 house, an engineering firm was contracted to study how best to renovate it for MRA’s needs. An engineer told Meyer that “when you take on an old building like this, what you do is put piles of money sacks in each corner and as the general contractor needs some, he’ll just grab one.” “Well…that sort of worried me,” quipped Meyer. So he and a board member, John Bunday, put on carpentry aprons and took on the renovations themselves. Bunday, who was an owner of Bunday Furniture in Lansing, is a talented
wood craftsman, while Meyer developed his construction skills growing up on a farm. For six months Bunday and Meyer invested a significant amount of sweat equity and got the building ready for occupancy. The renovations were extensive, including lowering the floor in the basement to accommodate the print shop and adding several support walls. “We were a growing small business so we thought it was important to control costs and save the organization money,” said Meyer. “Back then it was a stretch to go from leasing to owning,” explained Hallan. “Many people — particularly John Bunday and Larry Meyer — put in a lot of extra hours and personal toil to give MRA an ownership footprint.” Move-in occurred in 1983. The renovations had readied the building for staff, but the structure was far from perfect. As is typical with Victorian architecture, it featured several “choppy” rooms and the walls had settled into the soft soil so that in certain parts of the building the floors were several degrees off level. “A pencil would never stay on your desk. You had to wedge it under something or it would roll off,” recalled Hallan. Hallan joined MRA in 1985 as general counsel just as a second renovation to the building — the addition of a boardroom and more office space — was underway. For 10 weeks he and two other employees shared an office. He then moved into what was once the home’s formal dining room. “It had four doors entering into it and was sort of a walkway, which made ensuring privacy a challenge,” he joked. Historical value Mementos and materials of historical value, including a metal MRA logo that was imbedded in the boardroom wall and unique, Victorian-era plumbing fixtures in the building’s bathrooms, are being removed and preserved, Hallan said. MRA continues to rent out several residential and office properties next to and near the 221 building. “Our investment in the buildings in the area has been good for the neighborhood,” said Hallan. “We’ve made a lot of improvements there — we renovated aging former houses, added lighting, created open spaces, — and we’re going to continue to be good stewards of the neighborhood.” Jean B. Eggemeyer is a freelance writer and communications consultant. She worked for the Michigan Retailers Association from 1994-1999 and enjoyed her years of service in one of the refurbished Pine Street properties.
RETAIL TECHNOLOGY NEWS
Small businesses become new targets for data theft John Mayleben, MRA’s senior vice president, technology and product development, writes a regular column on retail technology. Contact email@example.com. Most of us hear about the really big data breaches that hit large retailers, governments and health care facilities. They make national news when they occur. But what we don’t hear about are all the “little guys” who increasingly are becoming the targets of cyber thugs. For a number of years the small and medium size businesses that accept cards as a form of payment were flying under the radar of the bad guys. But as large businesses have tightened up their card data handling procedures and bad guys are having a more difficult time hacking into their systems, the smaller companies have started to attract unwanted attention. More and more of these smaller businesses are seeing hacking attempts and, in some unfortunate cases, successful theft of cardholder data. According to the U.S. Secret Service and Verizon Communications, Inc.’s audit unit, there were 761 known breaches in 2010, up from 141 in 2009. Of these, 63 percent (482) were from companies with 100 or fewer employees. Visa has estimated the majority (95 percent) of the data breaches it now handles are from small and medium size businesses. A recent news story in the Wall Street Journal illustrated the negative impact that this could have on your business. In one case, a restaurant in Washington State ended up going out of business due to the cost of the
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audit and expense of cleaning up the mess from its data breach. In another case, a Chicago area newsstand hacked by someone using a Russian server ended up spending $22,000 on “investigations and security improvements.” The initial problem was traced back to weak password security. In both of these cases, the businesses were very small compared to the data breaches you hear about on the evening news. Could your business, even in the best of times, absorb a $10,000–$20,000 hit to the bottom line? Realizing that small businesses look to their processors for assistance, last year we started providing automatic insurance coverage for data breaches for all of our merchants. For merchants that process their credit card transactions with us, we provide $100,000 in insurance coverage per merchant identification number (MID) (with a maximum of $500,000) as part of their monthly statement fee. This insurance will cover the audit, the fines from the card associations and the costs to reissue the cards that were compromised. If you aren’t using a processing solution that provides this coverage, you should either contact your insurance company to explore getting a policy that would cover you, or consider changing to a merchant processing solution that covers you for this type of event. More and more large companies are “cleaning up their act” when it comes to protecting card data. While that’s good, it has moved small and medium size businesses into the bad guys’ crosshairs. Are you protecting your data, and are you insured against a breach?
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Higher jackpots for ‘Jack’ by M. Scott Bowen, Commissioner As of October 2, players have more chances to win on The Jack, the popular addon game to Club Keno. The updates include new prize tiers that will allow players to win a prize when they match four, five, six or seven numbers. The Jack will still continue to cost only $1 extra per draw and jackpots will start at $10,000 instead of $2,000. Players will notice eight easy-pick numbers printed on their ticket instead of seven. Like before, when they match all their “Jack” numbers to the Club Keno numbers drawn, they win the advertised “Jack” jackpot. When they match four numbers they win $1, five numbers earns $5, match six wins $50, and seven wins them $350. This new prize structure makes the overall odds of a player winning a prize at approximately 1 in 9, which can mean more winnings in your customer’s pockets. The jackpot will continue to be funded as it was, but will start at $10,000 instead of $2,000. Validation codes By now you and your players have noticed that the Lottery is no longer printing low-tier sight validation codes on instant tickets. Recall that these three-character codes were printed underneath the scratch-off material and were included for the benefit of retailers as a means to quickly identify a ticket winning up to $25 by sight rather than through the terminal. The decision to eliminate the codes
has been influenced by a number of factors, the most important of which is that many players have come to believe that they understand the meaning of the codes. While this is probably true at the low-tier prize level (between $1 and $25) where the codes can be easily deciphered, it is absolutely not the case on non-winning, mid-tier and high-tier prize-winning tickets where the codes are random and have no meaning. The false sense of understanding that players sometimes have diminishes their play experience and can potentially result in a player throwing away a winning ticket. With or without the codes, the Lottery’s policy on validating tickets remains the same. All tickets must be validated through the terminal in order for the retailer to receive a cashing commission and for the customer to receive their prize. New Instants New instant tickets scheduled to go on sale October 10 include Money Magnet™ ($1), Wheel of Fortune™ ($2), Bingo Fever™ ($5) and Sparkling Gems™ ($5). This year’s holiday games — Nutcracker Cash™ ($1), Red, White & Green™ ($2), Silver Bells™ ($5), and Golden Wishes™ ($10) — are scheduled to go on sale on October 31. Over 94 cents of every dollar spent on Lottery tickets is returned to the state in the form of contributions to the state School Aid Fund, prizes to players and commissions to retailers. In fiscal year 2010, the contribution to schools was $701.3 million. Since its inception in 1972, the Lottery has contributed more than $15 billion to education in Michigan.
Sarasin promoted, staff reorganized Continued from page 2
Sarasin, who joined the MRA staff in 1981, had served as executive vice president of finance since 2008.
Other changes include the addition of William J. Hallan as vice president and general counsel, and naming Tom Tuggle as vice president of sales and Sue Stroup as director of program marketing and member retention. “This reorganization strengthens MRA by expanding our capabilities
and enabling us to reduce outside legal expenses,” said Hallan. William Hallan previously was an associate in the Bloomfield Hills office of the Dykema Gossett law firm. He is a magna cum laude graduate of the University of Toledo College of Law and Denison University and is a member of the State Bar of Michigan. Tuggle adds oversight of the MRA sales force to his continuing responsibilities as vice president of agent relations for Retailers Mutual Insurance Company. Stroup, who heads up new membership initiatives, previously was director of merchant processing sales and service.
Retailing really about sharing life experiences by Steve Flaster All decent people wish the horrific occasion of 10 years ago, now simply referred to as 9/11, had never taken place. But it did occur, the 10th anniversary just occurred, and retailers, at least in my vicinity of East Lansing and Okemos, need to rethink their actions or lack thereof on that recent day. I took an afternoon drive to see how stores were observing the recent day of remembrance and sharing their thoughts with customers. I cannot say I made an exhaustive study. However, from what I did observe, I was distressed and disheartened to see how little was being done by retailers to mark the occasion. Some were flying flags, but so many more were not. Retailing is more than selling goods and services. It is about sharing life experiences with people who, hopefully, become loyal friends and customers. Observing 9/11/11 in the right way, even with a small symbolic gesture like flying our flag, could only help cement customer relationships. Apparently and sadly, most retailers in my area thought that “no way” was the right way to observe that special day. Three responses 1. On the Friday before the 10th anniversary of 9/11, The Wall Street Journal did an article on the start of Fashion Week in New York City. Strangely enough, the first day was scheduled for Sunday, 9/11/11, and three major designers were having their shows that first day. One of them, Diane von Furstenberg, realized the importance of the situation facing her and rose to the occasion. According to Ms. Von Furstenberg, she held a meeting with her staff to consider the best approach. “We were a little confused about how to deal with the show situation on that particular Sunday…so we are making a contribution to Families of September 11th, a charitable fund, and making that aware to customers on every invitation.” Ms. Von Furstenberg, first of all, realized it was not just “her” decision, but instead a decision that needed support from the entire staff. She trusted the best motivations of her staff, and together they added nobility to business. 2. On the day before 9/11/11, most local supermarkets inserted their usual weekly fliers in newspapers. But only one in my area recognized what was happening in addition to food sales.
On the top of page three in its flier was a red, white and blue ribbon and the following statement: “In remembrance of all the lives forever changed on September 11, 2001.” This grocery retailer is a new player in the market, and I stopped by that day to congratulate its manager. Once inside, I found a lot to like about the market in addition to the company’s “values.” I will definitely be a customer. The store lost nothing and probably gained a lot by acknowledging what everyone else was thinking in that simple patriotic statement. It tastefully and appropriately demonstrated that noble thoughts and food shopping go together there. On 9/11 Sunday I passed the market again, and our nation’s flag was flying at half-mast in a prominent position in the parking lot. It was all so simple, so appropriate and so right for a retailer who wants to connect with his community and customers. 3. Also on the day before 9/11/11, I stopped at a locally owned store that I had previously held in high esteem. I asked the manager what she was planning to do to commemorate
the next day, and she looked at me as if I were crazy. She told me that she would never do such a thing as call attention to “9/11” when everyone was thinking about it anyway. I think she was very wrong and did a disservice to her customers and her store staff. Customers and staff don’t know what you are thinking if you don’t tell them and demonstrate that you share their values. What matters Customers have choices when making a purchase. Unless the store wants to compete totally on price, it has to understand and express what matters to customers. The sad event commemorated on 9/11/11 was on most shoppers’ and drivers’ minds. Just having a flag outside your store would have sent a message to customers and potential customers that there was more to you than meat and potatoes or paper and pens. This date was one of the many times when brains trumped dollars, and when retailers with only a modest budget could have made a strong statement. Low marks I stopped at our regional shopping
center. Not one store, not even the branch of a national department store, had a flag flying. Of course, flying a flag may be in violation of store leases, but in that case mall management should have made appropriate plans. I went inside the mall in hopes of finding at least a sign about the day, but that wasn’t to be the case either. There were hundreds of signs to read, but not one that pertained to what people were thinking about on 9/11/11. On the way home, I couldn’t help driving by a giant retailer. Yes, our flag was flying at half-mast in the parking lot. As a passionate fan of smaller businesses, I now felt even more disappointed in the retailers that are supposed to be the fabric and fiber of America. Smaller stores can’t match a giant retailer in most ways, but with a simple gesture and a little thought, they could have matched and exceeded America’s biggest retailers on 9/11/11. Steve Flaster is a retailer, instructor of retailing and marketing at Michigan State University, speaker and consultant. To reach him at Yes for Success Retail Consulting, call 517.655.6979 or email firstname.lastname@example.org.
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Lawmakers take up sales tax fairness issue Continued from page 1
small businesses throughout the state. “Retailers across Michigan are pleased that Reps. Kowall and Ananich recognize the simple fact that ‘a sale is a sale is a sale’ regardless of where or how it takes place,” said Hallan. “Government should not treat one type of sale differently than another when it comes to requiring collection of sales tax.” When consumers buy a product online, current Michigan law says they must pay the same sales tax they would if they were to buy the product from a store in person. But under Michigan’s current sales tax collection system, out-of-state, online-only retailers are able to exploit a massive legal loophole allowing them to forgo collecting sales tax. When remote sellers don’t collect the tax, consumers are required by law to pay the tax when they file their state income tax each year. Most aren’t aware of the requirement. Online-only retailers use this loophole to attract shoppers away from brick-and-mortar businesses by using deceptively lower prices, since Michigan retailers must add — and collect — the 6-percent sales tax to the customer’s bill. As a result, Main Street businesses are put at a significant com-
petitive disadvantage that puts Michigan’s business community at risk. To close the sales tax loophole the Michigan Main Street Fairness Act: • Moves online-only retailers under the same sales tax collection laws under which Michigan brickand-mortar businesses operate; and • Expands the definition of “nexus” or “physical presence” to include retailers who conduct business through affiliate businesses in Michigan or own subsidiary companies in an attempt to avoid paying sales tax. According to a report commissioned by MRA and released last month by Lansing-based Public Sector Consultants (PSC), the sales tax loophole has a significant negative impact on job makers and the state’s economy. The study found that closing the loophole would lead directly to the creation of as many as 1,600 new jobs and increase investment in Michigan’s economy in the form of sales at brick-and-mortar retail outlets by as much as $126 million per year. It also would save the state as much as $141.5 million in otherwise lost sales tax revenue from electronic remote sales in 2012 alone. Titled “Michigan Sales Tax Collection and the Internet: A Need for
Fairness,” the report found that the growth of purchases made by consumers through remote vendors over the Internet is a contributor to the state’s shrinking tax base and a hindrance to economic growth. “The major implication of this sales tax issue is an uneven playing field for Michigan-based retailers and outof-state online mega-retailers competing for the same purchase,” said Ken Sikkema, a senior policy fellow at PSC and a former majority leader in the Michigan Senate. “This uneven playing field reduces economic activity across the state and prevents small businesses in Michigan from adding jobs.” “There is no doubt that the retail sector in Michigan is suffering from this price disadvantage and would benefit from full collection of sales tax,” said Gary Olson, a senior policy fellow at PSC and the former director of the nonpartisan Michigan Senate Fiscal Agency. A copy of the report is available on MRA’s website, at http://www.retailers.com/mra/component/content/ article/723.html. “Local retailers provide hundreds of thousands of jobs in Michigan, while extending product knowledge and customer service to shoppers
across the state,” said Hallan. “But their businesses and the jobs they create are jeopardized when out-ofstate, online-only retailers exploit massive legal loopholes that allow them to forgo collecting sales tax at the point of sale, despite the fact that the tax is still due. “This legislation is a tremendous step towards leveling the playing field and protecting jobs in Michigan.” Barb Stein, owner of Great Northern Trading Company in Rockford, told reporters: “We want to make sure that anybody who sells something in Michigan subject to sales tax has to collect it, including Internet retailers.” Dan Marshall, owner of Marshall Music, with seven locations in Michigan, said: “Now is the time for lawmakers to lead and pass this critical legislation. The alternative is just more of the same — and that’s the last thing any of us can afford.” Retailers from across Michigan recently formed the Michigan Alliance for Main Street Fairness, a coalition of hundreds of job makers calling for the common-sense updates to Michigan’s tax collection system. More information about the coalition, including how to join it, can be found at www. standwithmainstreet.com/michigan.