Two new editorials in local papers are calling for online retailers to collect sales tax.
The first is from the Mississippi Press and offers a clear rationale for collecting sales tax online:
Until the issue is settled, Mississippi and other states will continue to miss out on billions of dollars that are owed to them, and homegrown bricks-and-mortar businesses will remain at a competitive disadvantage with online merchants.
If Mississippi politicians can come up with an effective way to capture sales taxes from items bought on the Internet, then they can shore up education, Medicaid, prisons and other public services that are suffering in the economic downturn.
And in a nice change from so many of the article we see, it makes it clear that sales tax is already due on online sales:
Some politicians have shied away from legislation that would correct the inequity, fearing constituents would accuse them of trying to raise taxes. Fact is, the sales taxes already exist and shoppers are supposed to pay them. They rarely do, of course.
The second, written by California state senator Loni Hancock, is from The Daily Cal, the University of California, Berkeley, paper. Senator Hancock immediately appeals to her university audience:
Despite our love of the written word, Berkeley, along with many other cities throughout California, has witnessed our cherished local bookstores vanish right before our eyes as a direct result of online retailers exploiting a legal loophole to avoid collecting sales taxes from consumers.
She too acknowledges that sales tax is already due on online purchases and makes it clear why she supports online sales tax collection:
It is important to be clear; there is not now, nor has there ever been, a sales tax exemption for Internet sales. However, many Californians are unaware that online purchases are subject to the state’s sales tax.
This lost revenue, which the state tax board estimates to be $1.1 billion annually, is critical, particularly in a time of enormous budget deficits and intolerable cuts to our schools and social safety net.
. . .
Failure to compel these out-of-state online retailers to collect sales tax gives these businesses preferential treatment by attracting consumption in California when they do not actually employ Californians or invest in our state.
This practice, unfortunately, comes at the expense of local businesses and economies.
We highly suggest you read both editorials—they’re well-written, thoughtful arguments for online sales tax collection.
The only thing we’d add is that, although the editorials focus on state legislation, the better solution is federal legislation. States are limited in what they can do by two Supreme Court decisions stating that retailers only need to collect sales tax for states where they have a physical presence. Those same decisions, however, said that Congress can change that.
It’s time for Congress to do just that. The Supreme Court was concerned that it would be too big a burden for retailers to collect sales tax for multiple states. Thanks to technological advances and the simplification measures of the Streamlined Sales and Use and Tax Agreement, that’s no longer the case.
Editorials like these make good arguments for online sales tax collection. Federal legislation is the best way to make that happen.