SID SALTER: 'Amazon Tax' dead, but likely will rise again in 2011

By Sid Salter

State Sen. Tommy Gollott, R-Biloxi, has walked the marble floors of the state Capitol Building for 42 years – 12 in the state House of Representatives and 30 in the state Senate.
Like most veteran lawmakers, Gollott sees the handwriting on the wall for the next two years.
That handwriting reads: “Make Draconian spending cuts or raise taxes.”
But in introducing Senate Bill 2927 during the just-completed 2010 regular session of the Mississippi Legislature, Gollott chose to interject a third option – raise revenue by maximizing collection of existing taxes.
SB 2927 is the so-called “Amazon Tax” – a measure designed to make online sales by out-of-state retailers subject to state sales or use taxes. Gollott’s bill never made it to the Senate floor and died a relatively quiet death in the Senate Finance Committee.
But after enduring a Fiscal Year 2010 with 9.4 percent average budget cuts, adopting a FY 2011 state budget with about 13.5 percent budget cuts and facing a likely FY 2012 state budget not underpinned by federal stimulus funds that could make 20 percent to 23 percent budget cuts necessary, lawmakers are likely to give Gollot’s “Amazon Tax” a second look during the 2011 regular session.
Some 16 states considered “Amazon Tax” proposals over the last year. Colorado, North Carolina and New York are deepest in the fight so far.
In Colorado, the state passed a law to require Amazon and other Web retailers to mail notices to customers reminding them of their state sales tax liabilities on purchases made online.
Amazon responded by shutting down their affiliate operations in that state – a program that pays people to advertise Amazon products on their own Web sites.
North Carolina tax officials asked Amazon for the names and addresses of their customers in that state in hopes of using that information to collect unpaid sales taxes. Amazon filed suit against the state and the case is pending.
In New York, Amazon built a huge affiliate business. State officials figured that affiliates based in New York gave Amazon a legal “nexus” in the state and began collecting $70 million in additional sales taxes from Web retailers including Amazon.
But Amazon sued New York over the law and that case is also pending.
Web retailers and state governments alike are watching those lawsuits like hawks.
The argument in favor of applying state sales taxes to online sales is a simple one – tax fairness.
Out-of-state companies that make Internet sales in the state but that have no legal place of business or domicile in the state don’t have to collect Mississippi’s sales tax from customers here.
Proponents of collecting Mississippi’s 7 percent sales tax for online purchases make these arguments:
- Failure to do so subsidizes the growth of distant companies, which contribute little to a community’s civic and economic vitality, by giving them a 7 percent price advantage over Mississippi’s local stores.
- It undermines state and local governments by reducing tax revenue for schools, police and other services – a revenue loss that will continue to grow as Internet sales continue to displace in-store sales.
- It makes a regressive sales tax more regressive (only those with computers, Internet access and credit cards are able to take advantage of the tax break) on poor people.
Gollott’s bill may have died this session, but the political stakes will increase as the 2011 elections approach. Confronted with deep spending cuts and few options for new revenue, Gollott’s “Amazon Tax” will likely resurface as a means to raises sales tax revenue without raising sales tax rates.
Contact Sid Salter, Perspective editor, at the Clarion-Ledger (601) 961-7084 or e-mail ssalter@clarionledger.com.