Lawmakers increasingly likely to follow Alabama’s ‘Amazon’ tax lead here
By: Sid Salter
Here is a little trigger warning for readers tired of the issue – I’m writing about online sales taxes again.
So what’s new? Well, at of the beginning of the new year in 2017, the 45 states and the District of Columbia – those that collect sales taxes – are still struggling to capture lost revenues from online sales.
Why are they struggling? Well, Congress and the Supreme Court still have not provided an easy path around the court’s 1992 ruling in the Quill v. North Dakota case. 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.
Yet a growing number of states are extending sales taxes to online retailers with in-state sales affiliates. Amazon, the online retail giant, now collects sales taxes in all but a dozen of the U.S. states that collect sales taxes – including Alabama, Florida, Georgia, Louisiana, North Carolina, South Carolina, Tennessee, and Texas.
In truth, the tax is technically a “use” tax levied on an item purchased without paying your home state’s sales tax but that you bring back to your home to use. In other words, the law says you owe the tax but there is no one compelling you to pay it.
The tax is owed under law, but paid on the – and I use this term loosely – the honor system. You owed the tax from the moment you hit “send” on the online order. Yet unlike the mom-and-pop bookstore or grocery or hardware emporium operated by your hometown friends and neighbors, nobody is ringing up that sales tax as part of the sale.
But beginning Jan. 1, Amazon will now voluntarily be adding appropriate sales tax amounts to items they sell to customers in Louisiana. The company negotiated a similar agreement that began enforcement on Nov. 1, 2016 in Alabama.
Louisiana offered Amazon a choice – document taxable purchases delivered to the customers or collect the applicable taxes. Amazon decided it was cheaper and easier to collect the taxes.
The majority of U.S. states are moving in the direction of either negotiated voluntary collection – as was the case in Alabama – or so-called “tattletale” laws like those adopted to get the taxes collected in Colorado. But after decades of watching sales and use tax revenue losses to thriving online sellers, state lawmakers across the country woke up and engaged on the issue.
And despite the predictable wails from the “no-new-taxes-never-ever” crowd, it is the steady growth of online commerce that is bringing an air of inevitability to the passage of these collection laws. Lawmakers are beginning to admit that if America is making a sea change in how we shop, then state and local governments much adapt as well in how sales taxes are collected.
False claims that either collecting these long-existing taxes (since 1932 in Mississippi) represents new taxes or “taxing the Internet” have also been pretty well exposed.
President Obama signed the Trade Facilitation and Trade Enforcement Act of 2015 in 2016, otherwise known as H.R. 644. H.R. 644 specifically and permanently prohibits any tax on access to the Internet. The bill removed some previously existing tax levies on Internet access.
The percentage of total tax revenue in Mississippi 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 – and at a time when the state needs revenue for public education, transportation and infrastructure, public health care, and corrections.
Alabama, Florida, Georgia, Louisiana, Tennessee and Texas legislators have all taken steps to level the playing field for their bricks-and-mortar retailers trying to compete with mega-online retailers. Mississippi lawmakers can and should follow suit.
To do less is to subsidize Amazon and some of the most successful online retailers on the planet at the expense of Mississippi bricks-and-mortars retailers and employers.
Sid Salter is a syndicated columnist. Contact him at email@example.com.