Round-up of recent press on online sales tax collection

October 3, 2011
Recent press

Recent press on online sales tax collection

We’ve been looking at the recent editorials and news articles on online sales tax collection, and we’re encouraged to see that most of them are in favor of it—a position that we’ve long argued to be practical, sensible, and simply right.

From the Tulsa World, “Only fair: Online sales tax is necessary”:

No one likes paying taxes. They are, however, necessary to keep a city and state running. You might not like a sales tax, but you certainly like good roads.

If we’re going to have taxes, it is imperative that everyone pays their share. For years, some shoppers have been skirting local and state sales taxes by purchasing items online that are available locally. That is not fair to those who support local businesses and keep their cities running with local sales taxes. . . .

States and cities . . . need the income that they have coming. Local merchants, who choose to do business here and employ Tulsans and spend their hard-earned money with fellow local merchants and pay their sales taxes, deserve a level playing field. 

From the Bismarck Tribune, “Main Street Fairness Act: A bill to close the sales tax loophole”:

Studies show that states are losing about $23 billion annually in sales taxes. The tax is legally due on purchases but goes uncollected because the seller is not required to collect the tax and the purchaser fails to report and remit the tax due. This situation creates a huge disparity and an extreme disadvantage for our main street retailers who are competing with retailers selling over the Internet or by some other remote means. . . .

The Main Street Fairness Act addresses the issue of fairness and levels the playing field for all retailers. . . .

Cities, counties and state government rely on sales and use tax revenue to provide services to our residents and to build and maintain a high quality infrastructure for the businesses operating here. The Main Street Fairness Act is an important bill for the retail industry and states—it provides for fairness across the retail industry while permitting individual state sovereignty and supporting a fair sales tax system. . . .

The proposed legislation will go a long way to support and encourage growth in our local North Dakota businesses along with main street retail industry across the country. We encourage Sens. Kent Conrad and John Hoeven and Rep. Rick Berg to sign on to the legislation and support it when it comes up for a vote.

From the Detroit Free Press, “Online sales tax collection rules would level playing field and add funds to state”:

Main Street retailers, the backbone of America, stimulate local economies, build communities and provide good, stable, local jobs. In July retailers added 26,000 jobs to the national economy.

However, these jobs are being threatened by online retailers fighting to preserve an unfair price advantage of 6% over brick-and-mortar stores in Michigan. . . .

In today’s marketplace, the shape of commerce is changing, but the rules remain stuck in 1992—well before the era of the iPad, smart phones and even home Internet access. Online-only retailers are exempt from collecting sales tax at every point of purchase. . . .

Many consumers are often unaware that the tax on online and catalogue purchases already exists. When an online retailer fails to collect the sales tax, it falls to the consumer to report that tax directly to the state, which is often not done.

The Center for Business and Economic Research estimates that this year Michigan will lose more than $125 million in revenue due to the Internet sales tax loophole. As legislators grapple to fill budget gaps, this revenue would go a long way toward adequately funding essential public services: paving roads, keeping police and firefighters on the job, and providing our children with a quality education.

States have been compelled to take action in the absence of a national approach to sales tax collection. But a possible solution is the Main Street Fairness Act, introduced in Congress in July. The bill is designed to grant states the authority to set up a simple and equitable system of tax collection on remote sales and, ultimately, the ability to collect these taxes at the point of purchase. . . .

We need a 21st Century framework to ensure a marketplace that benefits online retailers in addition to brick-and-mortar retailers, who provide good local jobs, support our communities and drive America’s economy.

Our country is overdue for a national solution to the issue of sales tax collection.

From Gazette.net (Maryland), “Inaction on Internet sales tax hurts states”:

For Maryland, collecting sales tax on Internet purchases could yield additional revenue estimated to be in excess of $200 million annually, which the state sorely needs to bring budgets into balance given the lagging condition of our local economy and continued structural deficit.

Without this revenue, which is rightfully owed to the state, programs such as Medicaid, K-12 education and our transportation infrastructure needs will be unmet without additional tax increases. . . .

More importantly, though, such a policy change would level a slanted playing field for bricks and mortar retailers who invest in our local communities and currently charge and collect taxes on sales via the Internet. . . .

Moving forward . . . our federal representatives and Congress as an institution should end this debate and do what’s right for state governments and more importantly for countless mom-and-pop retailers that serve as the backbone of our nation’s economy.

From the Midland (MI) Daily News, “Local businesses like proposed Internet sales tax legislation”:

Legislators hope a newly proposed online sales tax bill will equalize what they consider an unfair playing field between Web retailers and small businesses. . . .

Michigan would save up to $141.5 [million] in lost sales tax revenue if the [state] bill becomes law, improve sales at brick-and-mortar retailers by as much as $126 million and create up to 1,600 jobs, according to a report from the Lansing-based Public Sector Consultants.

Jerry Meier, owner of Meier Camera Shop, 122. W. Main St. in Midland, said he cannot believe the state has chosen to miss out on those tax dollars for so long.  “We’ve wondered about this for some time. I think it’s going to make a difference,” Meier said. “Everyone says ‘buy local,’ but when it gets right down to it, they look at (online retailers) as an advantage.”

A 6 percent disadvantage when it comes to sales taxes makes a large difference in the long run, he said. . . .

“Legislators we’ve talked with understand that a sale is a sale is a sale regardless of where it takes place,” said Tom Scott, senior vice president of the Michigan Retailers Association. “Government should not be picking winners and losers by favoring one type of retailer over another — especially when it’s our hometown Michigan retailers who are being hurt by the current situation.”


Baltimore Sun editorial supports online sales tax collection

June 24, 2011

The Baltimore Sun has published an editorial supporting online sales tax collection. It begins:

There’s no denying the convenience and simplicity of shopping online. Successful retailers like Amazon.com and Overstock.com have become giants as a result. Small wonder that online sales have grown to an estimated $200 billion annually, or about 7 percent of all retail transactions that take place in this country.

But should taxpayers be forced to subsidize the industry? That’s essentially what happens now as the bulk of digital sales are not subject to state and local sales taxes. Not only does it give virtual commerce a big advantage over their Main Street competitors but it means that states have to balance their budgets with revenue from other taxes instead. (emphasis added)

The rest of the editorial is equally strong, addressing concerns about online sales tax collection (particularly political concerns) head-on. We were particularly excited to see that it directly refutes those who call sales tax on online purchases a new tax or a tax increase:

But in vetoing the bill [that would have made more Internet companies subject to his state’s sales tax], Governor Perry also acknowledged that something needs to be done to make the system fair. That will require action by Congress where, unfortunately, Republicans appear loath to take any action that might be construed as a tax increase.

Of course, this is nothing of the kind. Rather, it’s an acknowledgement that Internet retailers no longer require the sales tax exemption that might have seemed appropriate for the fledgling industry 19 years ago. Allowing that advantage to continue is a jobs killer—mom and pop stores that pay taxes and employ local residents are getting the short end of the stick.

It’s an excellent argument, and we highly recommend that you read the entire editorial.

We do want to correct one item in the article, however:

One promising alternative is an ongoing effort to create a streamlined sales and use tax—a standardized sales tax nationwide. So far, 24 states have signed onto the agreement.

This statement could be easily misinterpreted to suggest a single nationwide sales tax rate. While it’s clear that they’re talking about the Streamlined Sales and Use Tax Agreement (SSUTA), readers should be alerted that SSUTA does not create or recommend a single nationwide sales tax rate.

States that are members of SSUTA agree to standardize sales tax categories and definitions, so that what falls into the category “candy” in one state doesn’t fall into the category “food” in another. They also agree to use standard tax return forms, so that retailers don’t need to fill out a different form for every state, and they agree to standardize other sales tax data, such as tax base definitions. All of this is designed to make it easy for retailers to collect sales tax for multiple states.

But SSUTA does not create a single sales tax rate for its member states, as the editorial seems to suggest. Every SSUTA state still retains the autonomy to set their own sales tax rate.

With that one correction, we can wholeheartedly recommend the editorial—which, incidentally, is just the latest in a long line of articles supporting online sales tax collection.


Maryland’s governor and comptroller speak out on online sales tax collection

June 22, 2011
Boston.com

Boston.com: MD governor and comptroller support online sales tax

According to an article on Boston.com, the Maryland Bureau of Revenue Estimates is preparing a study on uncollected online sales tax that is due at the end of the summer. But the most interesting part of the article are the quotes it contains from the state comptroller and governor:

“The key point for Maryland is that the Internet industry is no longer in need of subsidies and tax protections and special treatment,’’ [Maryland State Comptroller Peter] Franchot said. “They’ve grown into behemoth companies that they currently are, and they have a responsibility to the states, I believe, that they do commerce in. Right now, they’re avoiding it on a technicality, which is `we don’t have a bricks and mortar company in Maryland.’’’

Maryland Governor Martin O’Malley wrote a letter to Comptroller Franchot asking him to investigate the issue of online sales tax:

O’Malley, a Democrat, noted in his letter that the state’s Department of Legislative Services adapted a study by the University of Texas to estimate that Maryland loses more than $160 million each year from unpaid taxes related to Internet sales.

“I am concerned that the failure of any subset of retailers to collect and remit sales tax has a negative impact on Maryland’s overall fiscal strength, including our ability to meet our priority investments such as public school construction or maintaining our Transportation Trust Fund,’’ O’Malley wrote.

We’re happy to see state officials speaking out on the issue, and we hope that they’ll let Congress know how they feel. Only Congress can let states require out-of-state retailers to collect sales tax, and each state’s representatives need to know how important the issue is to the state’s governor and other officials.