Congressman Steve Womack has been supporting a Marketplace Fairness Act that would require those who sell products through the Internet to collect and pay sales tax to the state in which the purchaser lives.
So far, Womack has met with some opposition by those who claim such a law would constitute a tax increase. But, would it?
Many states have a sales and use tax provision that mandates that residents of those states who buy goods out of state report the applicable sales tax on their income tax return — but most people don’t do it.
It is estimated that $23 billion in state sales tax goes uncollected every year when products are purchased out of state and go unreported or uncollected. That’s $23 billion in tax that not only the states lose, but also towns and counties do not get their pass through portion of those taxes. Those are tax dollars that usually go into the general fund for those towns and counties that can be used to pay firemen and policemen, or provide city or county services or for upkeep on roads and parks.
The loss of that tax revenue also means that the resident population, on a continuing basis, loses the use and benefit of those tax revenues. It also means that those same residents may face increased local taxes to make up the difference.
Think about it. If you drive to Branson and buy something, you pay a sales tax that is shared by the state of Missouri with its towns and counties. If you make the same purchase in Harrison, you pay a sales tax that is shared by the state of Arkansas with its towns and counties. Most people would consider that fair.
However, as it now stands, if you make that same purchase online — you pay no sales tax to anyone — that’s not fair.
It’s not fair to those who do faithfully collect and pay sales tax and it’s not fair to the residents that live where that tax should be collected and used for the betterment of the state or local community.
Under the Marketplace Fairness Act, out of state businesses with less than $1 million in annual sales would be exempt from the law. Those who have annual sales over $1 million in sales would be furnished software by each state to allow for an orderly method of keeping up with the sales tax to be collected and remitted. That would put most everyone on equal footing and bound by the same obligation — that’s fair.
Having read through all this, there may be some who would still look at this as a tax increase.
On second thought, I would hope all would see the fairness in it and realize it is not a tax increase. If anything, it is a way to recover sales tax that is not being reported, or if you will, a way to recover lost sales tax. That lost tax hurts all of us.
