04.23.2014  |   | Subscribe  | Contact us

All News & Blogs

E-mail Alerts

Lost, not new, tax
States should be able to collect sales taxes on Internet purchases

Date published: 4/28/2013

THE U.S. SENATE plans next month to vote on, and presumably approve, legislation that would let states collect sales taxes on Internet purchases by their residents. Bravo. But there are signs the bill will face tough going in the House.

The measure does not represent a "new" tax burden, as opponents claim. It would simply close the loophole that allows shoppers to avoid sales taxes by buying online. Sales taxes are a significant and established source of revenue for needed public services. Check that old civics book.

States are feeling a "Net" loss of revenue as shoppers do more business online. The National Retail Federation says that while cyber sales represented only 10 percent of all holiday season sales last year, that figure was up by more than 4 percent over the prior year, and the trend arrow points north.

Virginia officials have long asked taxpayers to account for the Internet tax-free discrepancy by adding up their online purchases for the year, calculating their debt, and paying it when they file their state income tax. Only the angelic among us comply. Thus, the Old Dominion's new transportation package counts on passage of the Marketplace Fairness Act. If Congress falters, residents of Northern Virginia (but not Greater Fredericksburg) and Hampton Roads will pay more for transportation upkeep and construction.

Under the federal bill, states could compel large online retailers to collect sales tax and forward it to the state where the purchase was made. Small sellers with out-of-state revenues of $1 million or less would get a waiver.

The bill's passage should be a slam-dunk. But many House members mis-define it as a tax increase, rejecting it out of hand. Nuts. A state has a realistic expectation to collect sales taxes on purchases made by its citizens, whether at a local store or via home computer.

Limiting a tax burden is one thing. Denying states the ability to recoup rightful revenue they are losing because residents are making purchases from far-flung venues is quite another. Counter-arguments are hard to buy.