Meadville Tribune

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CNHI News Service Originals

October 24, 2011

Conflicted politics deter sales tax reform

(Continued)

CORSICANA , Texas —

Billions of dollars already have. The Center for Business and Economic Research at the University of Tennessee estimates uncollected sales taxes will amount to $12 billion this year in the 45 states and hundreds of municipalities that impose them.

It is not known exactly how many brick-and-mortar businesses have closed because of tax-free online competition but the recent demise of the Borders bookstore chain is cited as a prime case of lost jobs and community presence by proponents of closing the tax loophole.

The U.S. Supreme Court in 1992 exempted online retailers from having to collect sales taxes under the physical-presence principle, shifting the burden to pay them onto consumers through the so-called “use tax” requirement in sales tax laws. But that’s an honor system few consumers comply with and is also difficult to police.

Online retailers contend there’s a very practical reason they should not be required to collect and remit sales taxes – the 9,600 sales tax jurisdictions in the U.S. and their varied tax rates, exemptions and other special provisions. They argue the issue requires a national resolution.

Efforts are underway to get Congress to close the tax exemption for online retailers and to streamline and simplify the various sales tax codes to make collection easier. Yet it is in the idea-only phase of consideration and no candidate is talking about the issue on the presidential campaign circuit.

Supporters of federal legislation say that while the numbers add up, the politicians won’t own up, fearful of offending voters who don’t like paying sales taxes.

Meanwhile, bricks-and-mortar retailers say they’re stuck with having to tag on the sales tax, putting them at a price disadvantage with their online competitors.

At the Two Doors Coffee Shop in Cook's hometown of Corsicana, Tex., owner Todd Jones says the unfairness unfolds almost daily at his business. He said customers who stop by for a bowl of potato soup or a piece of his buttermilk pie pull out their smart phones and snap a picture of the fancy tins of tea on display. “They tell me, 'I can get it cheaper if I order it online' '' and avoid the 8.25 percent combined local and state sales tax, he said.

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