Legislators slowly coming around on online sales tax collections
Published 11:50 am Wednesday, October 26, 2016
Slowly, as revenue projections continue to fade, Mississippi legislators are beginning to come around to the inevitable conclusion that the state should collect all the sales taxes already due – not just on those transactions that take place in bricks-and-mortar stores.
Chalk it up to desperate times, desperate measures – or chalk it up to simply making peace with the runaway growth in online shopping in a state that is heavily dependent on sales tax. Or, simply chalk it up to Mississippi leaders decided to bring a digital solution to an analog problem.
Shopping habits – whether people buy online or drive to a local store – is costing Mississippi millions in sales taxes that were enacted in 1932. It gets worse by the year.
One of the political dodges of full collection of online sales taxes has always been: “It’s a new tax. No new taxes.” Not true.
But even people selling that line have to admit that culture changes have impacted the role sales taxes have long played in government finance.
The National Conference of State Legislatures observed: “In many states, the sales tax makes up a significant chunk of total tax revenue. On average, it accounted for 31.2 percent of state tax collections in 2014, and more than 50 percent in a few states. It is commonly criticized for its regressivity — low-income people lose a greater percentage of their income to the tax than the wealthy do — but its historical stability relative to the income tax makes it an appealing revenue-raiser.”
The percentage of total tax revenue in Mississippi that’s comprised of sales tax is nearly 40 percent, so declines in sales tax collections lost when revenue from growing online sales isn’t collected creates even more problems for state government. That fact became evident across the state line in Alabama recently and the Alabama Legislature acted. Now, all Amazon online purchases made by Alabama shoppers will have an additional eight percent sellers use tax.
That means that our neighbors in Alabama have found a way to level the playing field between online sellers and brick-and-mortar retailers in their state — an inequity that continues to plague Mississippi retailers and the state’s tax revenue stream that has been long dependent on sales taxes collected by those storefront retailers.
Because of Amazon’s agreement to participate in Alabama’s Simplified Use Tax Remittance Program, Amazon will collect the tax and pay to Alabama on the 20th of each month with the standard two percent discount taxpayers receive for paying on-time. The new law, passed in 2015, will go into effect on Nov. 1 and requires online retailers that do not have operations within the state, to collect, report and distribute the eight percent tax back to the state.
Republican State Rep. Mark Baker of Rankin County, a solid conservative and nobody’s wild-eyed tax proponent, said that Mississippi should follow Alabama’s lead and enact a law that would tax internet sales – that despite rumblings that such an action might create litigation.
“I believe we should follow Alabama as closely as possible and get ourselves in line for litigation,” Baker said.
What should be clear is that there’s a huge difference in “taxing the internet” and collecting online sales taxes the same as in-store transactions.
The National Conference of State Legislatures identifies an annual $303.4 million in uncollected Mississippi sales tax revenues. They aren’t tax increases. Buyers, on the honor system, are already 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.
Paying Mississippi sales tax isn’t optional in stores because we make merchants the tax collectors. Why shouldn’t online sellers be required to collect the very same taxes?
Baker’s right. Mississippi should enact a law similar to Alabama’s in the 2017 session. It’s a good first step.
Sid Salter is a syndicated columnist. Contact him at firstname.lastname@example.org.