The political tea leaves were rather easy to read on the topic of this week’s blockbuster announcement that Amazon was the first major online retailer to volunteer to begin collecting Mississippi’s 7 percent sales tax — technically a “use tax” — on Feb. 1.
The issue had been gaining steam for years. But the intersection of falling political dominoes in surrounding states and the realization that Mississippi could no longer forego millions in state revenue due the state that brought the issue to a head.
Nationally, Amazon led online sellers in realizing that their choice was to negotiate a settlement and voluntarily remit sales taxes before states change their laws to compel them to pay.
Gov. Phil Bryant, both in remarks last fall and in his most recent “State of the State” address, signaled that the days of Mississippi losing millions of dollars annually in uncollected sales taxes from a levy that has been on the books since 1932 were ending.
To those paying attention, legislative support beginning last year from conservative Republicans like State Rep. Mark Baker of Brandon and State Rep. Trey Lamar of Senatobia — and others — for full collection of an existing tax before anybody started talking about new taxes was also evident.
Bryant’s appointment of former House Appropriations Committee Chairman Herb Frierson to lead the Mississippi Department of Revenue was also a key component of the Amazon negotiation being successfully resolved. Few in state government knew better than Frierson that Mississippi was simply running out of runway in terms of crafting functional state budgets without recovering some of the sales tax revenues being lost as shoppers migrated from traditional stores to online sellers.
Amazon, as they did in recent months in neighboring Alabama, volunteered to collect the state’s sales tax in a nod to the approaching inevitability of legislative action to compel e-sellers to collect the tax as bricks-and-mortar businesses in the state have for decades been required to do. At least three Mississippi bills remain alive to accomplish by legislative action what Frierson and his staff did through heady negotiations.
Mississippi will now be one of 36 states (and Washington, D.C.) where Amazon collected sales or use taxes. Noting that five states levy no sales taxes, which leaves only nine states where Amazon has not agreed to collect legal sales taxes: Arkansas, Hawaii, Idaho, Maine, Missouri, New Mexico, Oklahoma, Rhode Island and Vermont. South Dakota and Wyoming are the latest two states added to the list with Mississippi.
Why does it matter? First, there’s the monumental unfairness of a 1932 Mississippi law that made mom-and-pop merchants the tax collectors when our state adopted the sales tax — but years later when technology allowed out-of-state competitors to sell their wares in state, we don’t require them to compete under the same tax collection burden. Out-of-state online retailers like Amazon had a 7 percent price advantage over mom-and-pop businesses who provide jobs, pay other Mississippi taxes, and support our communities in dozens of other significant ways.
Second, there is basic economics. Sales taxes are regressive taxes, hitting the poorest people the hardest. Therefore, if Mississippi is going to make the largest single segment of state revenue dependent on sales taxes, then we should collect every penny of that tax. Letting online merchants and online customers slide says that people who can afford computers and internet connectivity get to live by a different set of rules than those who have no other means to buy their goods than over the counter at a local store.
Third, and perhaps most important, there is the math. Mississippi derives 43.3 percent of its tax dollars from taxes on general sales. The next largest segment of the state’s tax revenue comes from personal income at 22.6 percent. In other words, 66 percent of Mississippi tax revenue comes from sales tax or personal income tax.
So as traditional point-of-sale shopping declines and online shopping increases, Mississippi’s sales tax collections — the bedrock of Mississippi government finance — also decreases. That leaves government scrambling for other sources of revenue through altogether new taxes, or simply higher taxes in large existing categories like personal income.
Full collection of existing sales taxes or higher personal income or property taxes to offset the foregone online sales tax losses? Frankly, the only cogent question now is what took Mississippi so long.