That virtual ka-ching this time of year is music to the ears of online retailers, but government mostly misses out on the party.
That could change if Missouri Gov. Mike Parson is successful in advancing a law to collect sales tax on online retail purchases, including those from out-of-state businesses. The governor is making online sales tax collection a priority for the 2019 legislative session that begins next month in Jefferson City.
We believe this is the right move, not only because it could generate up to $150 million a year, but because local brick-and-mortar businesses deserve a fair playing field against online competitors.
More than half of U.S. states have enacted laws to collect a sales tax from remote retailers, following a Supreme Court decision last summer. The court ruled that states can require an online retailer to collect sales tax, even if that business doesn’t have a physical presence in a particular state. Some large retailers, like Amazon, have already started collecting taxes.
There is a catch. States that enact an Internet sales tax aren’t allowed to put an excessive burden on interstate commerce.
No one is exactly sure what this means, but it seems open-ended enough to keep litigators in business for a long time. Most observers believe states are better positioned with a relatively simple system of taxation.
Simple is a relative term here. Missouri is not alone in having a web of state and local taxing jurisdictions that will apply any new law on collecting online tax.
The Council on State Taxation gives Missouri a “C” grade on the simplicity of its tax administration, suggesting that we aren’t the worst but that there is room for improvement. Lawmakers, in considering the governor’s proposal, should resist the urge to make Missouri’s tax system even more complex but instead strive for a more simple and fair way of collecting revenue.
The second issue involves possible uses for online sales tax revenue. Parson stopped short of suggesting specific plans but noted that infrastructure and workforce development remain key goals for his administration.
Recall the tendency of gaming revenue to get lost in the abyss of the state budget. Missouri needs to seek specific beneficiaries of any new funding source, and crumbling infrastructure seems like a good start.
Finally, lawmakers should put aside their aversion to any taxes and understand that small businesses, facing online competitors across the globe, remain a backbone of our local communities.
The online marketplace altered the relationship of buyer and seller, as well as the government. A fair online tax restores some order to these traditional roles, to the benefit of all Missourians.