Best Buy's Joly: Web retailers should collect sales tax

Best Buy Co. Inc. CEO Hubert Joly on Tuesday urged Congress to force online merchants to collect sales tax from customers, in his most forceful public statement on the matter to date.

Joly said the company's top legislative priority is enactment of a bill like the Marketplace Fairness Act, which would allow states to apply sales tax to all online purchases regardless of whether the seller has a physical presence in the state. The measure passed the U.S. Senate in 2013 but has stalled in the House.

"We don't think the government should pick the winners," Joly said in a speech to the Economic Club of Minnesota. "We don't think the government should subsidize Amazon and eBay."

Asked what Best Buy's other lobbying priorities are, he said, deadpan, that the company has five: "No. 1 is e-fairness, No. 2 is e-fairness, No. 3 is e-fairness, No. 4 is e-fairness and No. 5 is ..." He gestured to the audience of about 360, which called out, in unison, "e-fairness."

The bill in concept has the support of companies like Best Buy and Target, the Minnesota Department of Revenue and even Amazon. Critics, however, argue that it would impose a burden on small companies that may not have the technology to collect varying sales taxes on varying products in thousands of jurisdictions across the country.

Under current law, online buyers of goods are supposed to calculate the sales tax and pay it themselves. But enforcement is nil and almost no one pays the tax, referred to as a use tax.

Joly's statements were his most forceful public words on the matter in his 15 months as CEO, which has seen Best Buy's stock price triple in 2013, and then fall precipitously after a disappointing holiday season.

"In the fall of last year, I felt complacency sneaking back into the building," Joly said. "It was easy to believe the propaganda that was being written about us."

He was depressed about the stock price for "about 30 minutes," he said, but the company's overall strategy hasn't changed and the firm is making progress in its goals of improving sales and profit margins. Under Joly's turnaround plan, "Renew Blue," Best Buy wants to differentiate itself by offering advice, service and convenience to consumers.

"We're clear about the strategy — to be the authority and destination for technology products and services," he said. "Our mission is really to enrich people's lives through technology — not just sell products."

The Richfield-based retailer — which Joly admitted was a "disaster" in the fall of 2012 after the ouster of former CEO Brian Dunn and a takeover attempt by founder Richard Schulze — cut costs by $765 million last year and, in February, laid off 2,000 store managers.

The company has stabilized sales and grew its fourth quarter online revenue by 25 percent, Joly said. The goal, he said, is to have the same market share online as in the stores.

Shoppers increasingly start their research online, but Joly said he embraces that, inviting consumers to "showroom" at Best Buy because the retailer promises to match online prices. He emphasized that Best Buy's 1,055 U.S. stores are profitable, and 70 percent of Americans are within 15 minutes of one. The stores, sometimes thought of as a liability, are actually an asset, he said.

"We're now using our stores as distribution centers," he said. "If you want an 85-inch TV, we'll deliver it like a pizza."

Amazon has 60 distribution centers, he said, while Best Buy has 1,000.

The company's stock price was down 2.7 percent Tuesday to close at $25 per share, on a weak earnings outlook from consumer electronics competitor H.H. Gregg. Its first-quarter earnings report is due May 22.