ASKJ, YHOO, EBAY at record prices- just before I-net Taxes Come
ONLINE SALES: State should rejoin effort to collect fair tax share
The Detroit Free Press ^ / March 8, 2004
The nation's major retailers are moving toward an effective system of collecting legitimate state sales and use taxes on purchases made over the Internet. But Michigan is not participating in the process, only watching.
That's because the state's authorization to join the national Streamlined Sales Tax Project expired in December 2002. Michigan needs to rejoin the effort by July 1 or risk being left out in the cold. Given its budget situation, that would be dumb. Estimates of the revenue the state is losing due to unimposed sales taxes on Internet purchases run to more than $250 million a year.
State tax forms ask Michigan residents to volunteer each year what they owe in use taxes on mail-order or Internet purchases from retailers in other states. Relatively few do.
The current situation also is unfair to Michigan retailers, who collect the state's 6-percent levy at the point of sale and send the money to Lansing. While some large national retailers are now doing this with online sales, many do not, which gives them a 6-percent price advantage. Michigan shoppers can visit a store, inspect and compare products, talk to salespeople, and then go home and order online for 6 percent less -- often from a retailer who doesn't provide jobs, property taxes or even United Way contributions for any Michigan community.
The state House begins hearings this week on a four-bill package with bipartisan sponsorship -- a rarity in Lansing -- to get Michigan re-engaged with the national sales tax project. The states are working on an agreement for a uniform system of collecting taxes on Internet purchases for the 45 states with such levies. A federal judge ruled in 1992 that retailers were under no obligation to compute and remit such taxes because of the great variety in state and even local levies. But major national retailers such as Wal-Mart, Target and Amazon.com have since figured out how to manage this.
The national agreement will take effect when at least 10 states, including at least 20 percent of the population of the states with sales/use taxes, approve it. Once the agreement is in place, Congress has promised to pass federal legislation requiring remote retailers to collect sales and use taxes for the states where they make sales.
These are not new taxes, although opponents will say so. They are legitimate levies that are simply not being uniformly collected. The cost to states is only going to increase as more and more business is done on the Internet.
There is also an argument likely to be made that retailers who have no "brick and mortar" presence in a state derive no services or benefit from paying taxes in that state, and imposing them will only stifle Internet entrepreneurs. But this isn't about taxing businesses. It's about taxing their customers as the law allows for goods bought in Michigan or bought for use in Michigan. Whether those taxpayers derive sufficient benefit from every penny they send to Lansing is a subject for much broader debate.
The task at hand for the Legislature over the next few weeks will be to make sure Michigan is in a position to get its due. If in-state retailers get some equity with their online rivals in the process, that's not a bad side effect.
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