By Sid Salter
One of the nation’s more troubling tax inequities may fall as both the political and judicial stars appear to finally be aligning to address creation of a nationwide system of collecting existing sales taxes already owed on retail purchases made online as those taxes are already collected on counter sales.
In the existing system in Mississippi, the buyer owes 7 percent sales tax on the counter sale purchase of a hammer at his local mom-and-pop hardware store. The state has legally required the merchant to serve as the tax collector and before he walks out with the hammer, the state through the seller collects the sales taxes due from the buyer.
But if that same buyer in that same Mississippi town decides to buy the same hammer online at the same price, the online seller is not compelled to serve as the tax collector for the state of Mississippi. Mind you, the buyer still owes the tax. But he doesn’t pay it because he isn’t compelled to do so.
Hence, the counter sale buyer is treated differently in this system than is the online buyer. So, too, is the bricks-and-mortar merchant treated differently in this system than is the online merchant. The state loses significant tax revenue owed not under “new” taxes, but under existing taxes already levied.
The Congressional Research Service cited federal estimates of $4.1 trillion in online sales in 2010, which amounts to 16.1 percent of all U.S. sales – an annual $303.4 million in uncollected Mississippi sales tax revenues. A University of Tennessee study estimates that states nationally could gain as much as $11 billion in tax revenue from existing levies that simply go uncollected because online sellers have won the lobbying wars in Congress against streamlined sales tax collections.
But a recent 75-24 U.S. Senate advisory vote approving a plan to let states collect existing taxes on online purchases shows that the political winds are shifting. The plan presently before Congress, the so-called “Marketplace Fairness Act,” would establish that long-awaited national system of collecting online taxes and would allow states the option of joining the system or sitting it out.
Court cases on challenges to states that are trying to fully collect sales taxes have begun to swing toward the states and away from the online retailers. The online retailers, even Amazon, are now voluntarily collecting state sales taxes in eight states, soon to be followed by seven more.
Mississippi has been a bastion of the “no-new-taxes” political agenda, but the argument that collecting existing sales taxes from online customers in the same way that the state routinely collects the same tax from counter sales customers is weak as cold dishwater.
Sales taxes have been on the books in Mississippi since 1932. We all pay those taxes daily. Those of us who can afford a computer and an Internet Service Provider have a ready way to avoid paying some sales taxes by making our purchases online. Mississippians who can afford the option of shopping on the Web or who are simply not computer-savvy don’t.
In writing about this issue for the last 15 years, I’ve heard every rant and argument imaginable that there somehow exists an inalienable right to shop from home and not pay sales taxes. I’ve heard the old “well, I pay shipping charges!” argument along with the one that is closer to the bone of why people get so angry about being asked to pony up what they owe on existing sales taxes: “I pay a lot of taxes that benefit poor people who aren’t paying taxes, so if I get a little break on sales taxes on online sales, I deserve it.”
Interesting theory, that. The path to addressing that argument is pretty simple. If the Mississippi Legislature wants to exempt online sales from sales taxes, they can certainly do so. So far, since 1932, the Legislature in its wisdom has not chosen to do that. About 41 cents of every Mississippi General Fund dollar comes from sales tax.
Since Mississippi’s current sales tax law doesn’t exempt online sales from sales tax, then the question becomes one of why we as a state are leaving millions in uncollected taxes from existing tax levies on the table? If Mississippians truly believe in the philosophy of “no-new-taxes” it would stand to reason that one of the best ways to avoid new taxes is to fully collect the taxes that are already on the books.
SID SALTER is a syndicated columnist. Contact him at 601-507-8004 or email@example.com.