Mississippi is missing the boat when it comes to collecting sales tax on internet transactions. For a state that is suffering from continued sluggish revenue and a heavy dependence on the sales tax for state and local government operations, it is being negligent not to tap into this money.
Lynn Evans, who writes a periodic op-ed column for The Clarion-Ledger, this week noted that Mississippi is in the vast minority when it comes to not collecting internet sales tax. Of the 45 states with a sales tax, all but six have either passed laws or joined a national agreement with online businesses that provides for at least the largest e-commerce companies, such as Amazon, to collect and remit sales tax to the states where the customer resides.
Evans offers neighboring Alabama as a possible model for Mississippi to emulate. Under a 2015 law, writes Evans, “online retailers can opt in and pay a fixed sales tax rate statewide in lieu of the varying state, county and city combined tax rates.” In less than a year, the tax has brought in more than $2 million to Alabama’s treasury, and that number should balloon when Amazon, the world’s largest online retailer, comes on board starting Nov. 1.
Alabama splits the revenue, keeping half for the state and giving 25 percent each to the city and county where the online shopper lives. What the Alabama law and the federal Streamlined Sales Tax agreement do is get over the main objection of online retailers to collecting sales tax: that the various tax rates within states due to local add-ons make it too complicated to keep up with. A flat tax simplifies the process.
The key is to have some practical tax-collecting mechanism, not only to replace government revenue that has eroded as online sales have grown but also to better level the playing field between brick-and-mortar stores and their online competitors. As it stands now, online retailers — unless they also have a physical presence in Mississippi — have effectively a 7 percent pricing advantage on traditional retailers. That hurts Main Street, which, in turn, hurts communities that suffer from less tax revenue plus all the other benefits that these traditional retailers provide. Fewer brick-and-mortar stores produce blight and less support for community institutions — such as Little League baseball teams, churches and local charities — that have traditionally counted on retailers’ generosity.
The special tax treatment for online retailers was based on the argument that, when e-commerce was in its infancy, collecting sales taxes might stifle its growth. That argument no longer holds water, if it ever did.
Amazon is now the world’s eighth largest retailer of any kind. It and its brethren are more than capable of being the same taxing intermediary that mom-and-pop stores are required to be.