Internet taxes, sales tax are different
Published 12:00 pm Monday, September 28, 2015
By Sid Salter
National Taxpayers Union president Pete Sepp submitted op-ed columns to newspapers around the country in recent days trying to drum up an extension of the federal Internet Tax Moratorium and aiming that column in Mississippi at U.S. Sen. Roger Wicker, R-Tupelo.
The U.S. House in June voted to make permanent the 1998 moratorium on new state and local taxes on access to Internet services.
The 1998 moratorium was a reaction to state and local government attaching the same kinds of fees and taxes that now accompany monthly telephone bills. Under the original moratorium, states that already collected Internet access fees were allowed to continue to collect them, but no new government jurisdictions could levy the fees.
The Congressional Budget Office reports that governmental jurisdictions in seven states – Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas and Wisconsin – tax access to the Internet and that those entities collect “several hundred million dollars annually” from the fees. The House bill would lift the protection of the moratorium; the seven “grandfathered” states would no longer be able to collect the fees. The measure faces Senate action.
The House action banning Internet access taxes set up a political collision between the House-passed Permanent Internet Tax Freedom Act and the Senate-passed Marketplace Fairness Act adopted a little over a year ago. The current Internet Tax Moratorium expires Oct. 1.
The GOP-controlled House refused to take up the Marketplace Fairness Act (MFA), which would allow states to collect existing sales tax on large Internet sellers that have no presence within their borders.
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. Amazon collects sales tax in 24 states and according to MFA backers, is now allied with supporters of the bill.
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 of exactly the same goods.
The fair collection of sales taxes through all venues – In the name of “no new taxes on the Internet” has been sacrificed. There have been multiple state legislative efforts to address this tax inequity, but business interests representing companies that enjoyed an online 7 percent competitive edge over “mom–and–pop” brick-and-mortar location merchants have so far been able to beat back those efforts.
They aren’t tax increases. Buyers are supposed to pay the sales taxes they owe in states where sales taxes are applicable. Unfortunately, the majority don’t.
As the world continues to change how and where sales transactions are conducted, state revenues continue to be impacted by changing technologies despite no change in basic sales tax law to address that evolution.
With over 40 percent of Mississippi’s tax revenue coming from sales taxes, it’s difficult to overstate how relevant this issue remains in our state.
Sid Salter is a syndicated columnist. Contact him at email@example.com.