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Debate to continue about Internet sales tax

September 25, 2012

By SID SALTER

The combination of strained government budgets at every level, a stagnant economy, and rising food and fuel costs will force policy makers to confront every possible source of government revenue save a straightforward tax increase.

Anyone who believes that the Mississippi Legislature can generate either the political will or the votes to pass something like raising the state sales tax from 7 to 8 percent is living in a political fool’s paradise. Increasing tax rates or implementing across-the-board tax hikes is something that’s politically unpopular any time and is downright politically toxic in the current economic climate.

But will Congress and will state legislatures around the country deal with the issue of full collection of the taxes already levied? Perhaps. The longer the economic downturn lasts, the more likely such steps become.

Projections from the University of Tennessee indicated that from 2007 through 2012, Mississippi saw online or electronic commerce – e-commerce – generate some $2.384 billion in sales taxes due. Over the same period, Mississippi was projected to actually collect $1.815 billion in sales taxes. Uncollected e-commerce taxes from 2007 through 2012 in Mississippi were projected at $616.5 million.

Now, that $616.5 million doesn’t represent a tax increase. It represents 7 percent sales taxes due but not paid because the state isn’t collecting it. It represents sales taxes that some taxpayers are failing to pay while their neighbors dutifully pay through the nose.

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 traditional merchants have so far been able to beat back those efforts by labeling them as “tax increases.”

Since when is requiring all customers to pay the same sales tax rate a tax increase?

Even former Gov. Haley Barbour – who while facing the voters in Mississippi was famously “against raising anybody’s taxes” — is now banging the drum for congressional action to bring equity to e-commerce.

In 2011, Barbour said: “Fifteen years ago, when e-commerce was still a nascent industry, it made sense to exempt startups like Amazon.com from collecting and remitting sales taxes in states where they had no facilities. But today, e-commerce has grown, and there is simply no longer a compelling reason for government to continue giving online retailers special treatment over small businesses.”

“Failure to level the playing field threatens to, and in fact has, run many of them out of business, taking with them jobs and the sizable contribution they make to not just our community culture, but to the organizations who have long benefited from their charitable involvement,” Barbour wrote.

Barbour isn’t the only former or current GOP governor supporting the move. Back in July, Govs. Robert Bentley of Alabama, Tom Corbett of Pennsylvania, Mitch Daniels of Indiana, Dennis Daugaard of South Dakota, Bill Haslam of Tennessee, Paul LePage of Maine and Rick Synder of Michigan sent a letter to the congressional leadership to support enactment of the U.S. Senate version of internet sales tax equity legislation in that chamber known as the Marketplace Fairness Act.

Congress has the power to either enable or block states from making everyone pay the same sales tax – and Congress should give states that responsibility.

Sid Salter is a syndicated columnist. Contact him at sidsalter@sidsalter.com

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