When newspaper columnists write about state sales tax losses to online sales, the usual suspects shrug it off and makes the usual bogus defenses.
Collecting online sales taxes is a “new tax.” Not true. Collecting online sales taxes will impede a shaky economic recovery. Not true. Nationally, streamlined state sales tax collection is “too hard” and “technically impossible.” Not true. And collecting online sales taxes is a “tax increase.” Big time not true.
Mississippi has been collecting sales tax on purchases since 1932. We have made the merchants of this state the tax collector since the Great Depression. Populists and Tea Party types argue that since the technology for online sales didn’t exist back then, the law should apply online to traditional brick-and-mortar businesses, not online sellers.
Based on a Supreme Court’s 1992 ruling in the Quill v. North Dakota case, retailers don’t always have to collect taxes on Internet sales. But the high court in recent years appears to be reconsidering that ruling. The Quill case dictated that sellers must collect sales tax from out-of-state customers only if they have a physical brick-and-mortar presence in the customer’s state of residence.
A growing number of states are extending sales taxes to online retailers with in-state sales affiliates. Amazon collects sales tax in 24 states and according to Marketplace Fairness Act backers, is now allied with supporters of the bill. As recently as this week, Congress continues to debate the issue but reliably kicks the can down the road.
Online sales tax collections are an issue in the 2016 presidential campaign. Proponents of MFA said the new law would balance an unfair advantage that online retailers currently enjoy. The National Conference of State Legislatures identifies an annual $303.4 million in uncollected Mississippi sales tax revenues. The MFA doesn’t tax the Internet. It makes goods purchased on the Internet subject to the same tax collected daily on counter sales.
But in Mississippi, small town mayors and aldermen are now seeing the handwriting on the wall and are embracing the fact that online sales are taking revenues from existing, on-the-books taxes away from their abilities to pave roads, maintain water and sewer systems and pay their portion of K-12 education support.
In a recent exchange in The Clarion-Ledger, Sherry Veazey, executive director of the Miss. Municipal League said:
“The Mississippi Municipal League supports passage of a law to require online sellers to collect sales tax. Brick and mortar businesses---the mom-and-pop retailers that have made a commitment to their communities, are extremely important to cities and towns. Online retailers have an unfair advantage over our “Main Street” businesses who are working hard to grow and sometimes even sustain their business. These same businesses are contributing to the fiscal health of cities while internet based business do nothing to contribute to these communities or to the state of Mississippi.
“Allowing cities and towns the opportunity to collect sales taxes already owed to them on remote online purchases removes a competitive disadvantage for local businesses. While Mississippi law requires consumers to voluntarily pay tax on out-of-state purchases, consumer compliance is low. The implementation of an online sales tax would not constitute a “new tax” since taxes are already due on these purchases,” Veazey said.
Sales tax represents about 40 percent of all Mississippi General Fund revenues. While the steady and undeniable erosion of state sales tax collections will be evident in the 2016 session of the Mississippi Legislature, it’s already evident in small town government seeing their small merchants struggling to compete with online competitors.
The loss of online sales tax revenues – the uncollected portion of an old tax in Mississippi – impacts both state and local governments. And that trend will grow, not contract.
Online sales topped the $300 billion mark in 2014 and is expected to substantially exceed that number this year. Some $4.45 billion was spent for online purchases on Thanksgiving and “Black Friday” alone. UPS and Fed Ex are struggling to meet demand for delivery of online purchases because of the exponential growth.
For local governments in our state, the trend lines on sales tax are growing more ominous by the year.