First, there’s the shocking news that people who aren’t currently paying sales tax on their online purchases really don’t want any change in the status quo. Second, most of the people in the first category have convinced themselves that online sales taxes would represent “new” taxes that they didn’t previously owe.
Third, Mississippi’s political appetite for any “new” taxes is non-existent.
Still, the fact is that Congress is looking seriously at the Marketplace Fairness Act, a measure which would empower states to tax out-of-state online purchases. The bill would exempt small businesses that earn less than $1 million annually from out-of-state sales.
Proponents of the legislation say the new law would balance an unfair advantage that online retailers currently enjoy over traditional bricks-and-mortar stores. But buyers, on the honor system, are supposed to pay the sales taxes they owe in the states where sales taxes are applicable. Unfortunately, the vast majority of online buyers simply don’t. Therefore, if two next-door neighbors in Pontotoc buy the same hammer – one online from another state and one in a Pontotoc store – they both owe Mississippi sales tax of 7 percent for their hammer.
The difference is the state of Mississippi makes the Pontotoc store the tax collector for the hammer purchased directly. Online sales taxes aren’t “new” taxes because Mississippi has been collecting sales taxes on hammers since 1932. What would be “new” is that there would be uniform collection of existing sales taxes from everyone.
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.
The fact is that collecting online sales tax is simply full enforcement of a tax that Mississippi purchasers have owed since 1932. Many of the major online sellers like Amazon and business lobby voices like the National Retail Federation are backing the Marketplace Fairness Act.
Impatient with congressional efforts that continually kick the can of online sales tax collection down the political road, many states are trying to enact online sales tax collection efforts on their own – particularly larger states where the revenue stakes are much higher than in Mississippi.
It would seem that in a conservative state like Mississippi, efforts to make every taxpayer pay the taxes they owe would be greeted with applause. But in the decade that I’ve watched this issue evolve – or perhaps fester is more descriptive term – that’s just not been the case.
Sid Salter is a syndicated columnist. Contact him at (601) 507-8004 or email@example.com.