STARKVILLE, Miss. —
In the decade or so that I’ve written about the fact that Mississippi fails to collect sales tax on online purchases, three things have become painfully evident.
First, there’s the shocking news that people who aren’t currently paying sales tax on their online purchases really don’t want any change in the status quo. Second, most of the people in the first category have convinced themselves that online sales taxes would represent “new” taxes that they didn’t previously owe.
Third, Mississippi’s political appetite for any “new” taxes is non-existent.
Still, the fact is that Congress is looking seriously at the Marketplace Fairness Act, a measure which would empower states to tax out-of-state online purchases. The bill would exempt small businesses that earn less than $1 million annually from out-of-state sales.
Proponents of the legislation say the new law would balance an unfair advantage that online retailers currently enjoy over traditional bricks-and-mortar stores. Current law prohibits states from collecting sales taxes from retailers who have no physical location or “nexus” in their state.
But buyers, on the honor system, are 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. Therefore, if two next-door neighbors in Pontotoc buy the same hammer — one online from another state and one in a Pontotoc store — they both owe Mississippi sales tax of seven percent for their hammer.
The difference is the state of Mississippi makes the Pontotoc store the tax collector for the hammer purchased directly. No one enforces collection of the seven percent Mississippi sales tax due from the hammer ordered online from the other state.
Online sales taxes aren’t “new” taxes because Mississippi has been collecting sales taxes on hammers since 1932. What would be “new” is that there would be uniform collection of existing sales taxes from everyone.
The Congressional Research Service cited federal estimates of $4.1 trillion in online sales in 2010, which amounts to 16.1 percent of all U.S. sales. Estimates of foregone sales tax revenue from these transactions total some $23 billion, according to the National Conference of State Legislatures. The NCSL identifies an annual $303.4 million in uncollected Mississippi sales tax revenues.
What is lost in translation in the political debate over this issue is the contention that “Internet taxes” are new taxes. The fact is that collecting online sales tax is simply full enforcement of a tax that Mississippi purchasers have owed since 1932.
Congressional efforts to deal with online sales tax collections in a uniform way may fall victim to broader overall tax code reform efforts. But many of the major online sellers like Amazon and business lobby voices like the National Retail Federation are backing the Marketplace Fairness Act.
Impatient with congressional efforts that continually kick the can of online sales tax collection down the political road, many states are trying to enact online sales tax collection efforts on their own — particularly larger states where the revenue stakes are much higher than in Mississippi.
It would seem that in a conservative state like Mississippi, efforts to make every taxpayer pay the taxes they owe would be greeted with applause. But in the decade that I’ve watched this issue evolve — or perhaps fester is more descriptive term — that’s just not been the case.
(Sid Salter is a syndicated columnist. Contact him at 601-507-8004 or sidsalter@sidsalter.com)
Columns
Online sales taxes still unpaid
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