DENNIS SEID: Fairness at heart of online tax debate

If the studies and number-crunching are correct, Mississippi has lost more than $600 million in uncollected online sales taxes.

So, those great buys off Amazon and eBay may be great for your pocketbook, but not so great for the coffers of local and state governments.

And, of course, local retailers also missed out on critical sales.

Proponents of the Marketplace Fairness Act say it levels the playing field for brick-and-mortar retailers and their online counterparts.

Under the bill, states could require out-of-state retailers to collect sales taxes when they sell products over the Internet, in catalogs, and through radio and TV ads. The sales taxes would be sent to the states where a shopper lives.

If businesses with physical locations have to collect a sales tax on purchases, why are online retailers exempt, the argument goes.

It’s a competitive disadvantage, a loophole the MFA hopes to close.

The U.S. Senate passed the bill last week. It awaits a vote by the House of Representatives. If it’s approved there, it’s up to the individual states to implement an online sales tax plan.

However, opponents say it’s too burdensome to work through a swath of differing state tax codes. While the larger online businesses can handle it, the smaller ones don’t have the resources, they say.

Perhaps that’s why the legislation exempts businesses with less than $1 million in annual revenue. Perhaps the threshold may be pushed higher – to $10 million, as some have recommended.

Another argument opponents make is that it’s a tax increase. For the bill’s supporters, it’s about collecting a tax that hasn’t been paid. But the counter-argument is that people who haven’t been paying taxes on online purchases before will be hit with a “new” tax.

And there’s also this component of the online tax debate: The taxes will be collected by the state, not the individual municipalities.

So, cities may be wondering how those diversions will reach them.

The legislation requires states to provide Internet businesses with free software to calculate what taxes are owed and to designate a single agency to collect the taxes.

That would be the Department of Revenue in Mississippi, and it has said it could get complicated to implement a streamlined online tax program.

Still, if it takes a little work to cash in on some of the $600 million the state has missed, we should make every effort to do so.

For a cash-strapped state like Mississippi, imagine how far more than half a billion dollars can go.

Prolific online shoppers may protest, but the Marketplace Fairness Act is worth fighting for.

Contact Dennis Seid at (662) 678-1578 or

Dennis Seid/NEMS Daily Journal

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