Online sales tax

It seems so simple.

Retail sales shift to the internet, first as a niche phenomenon, then as a flood. The U.S. Supreme Court makes a significant ruling that clears the way for states to collect a tax on these online sales, just as they do from brick-and-mortar establishments. If the need isn’t yet obvious, the COVID-19 pandemic accelerates the trend away from in-person commerce. Jeff Bezos now has enough money to start his own space program.

Most legislatures got the memo after the Supreme Court, in 2018, ruled in South Dakota v. Wayfair that states could require far-flung businesses to collect and remit a tax on sales made over the internet. Previously, courts had held that tax collection was largely limited to businesses with a physical presence in a given state.

In the wake of Wayfair, states that already collect a sales tax were eager to establish “economic nexus laws” that allowed them to collect revenue from direct dot-com sellers and from marketplace facilitators, like Amazon or eBay, that don’t make anything but account for a significant share of online commerce.

But not Missouri. The Show-Me State remains a stubborn holdout, despite overwhelming evidence that the time has come to modernize tax law to reflect the reality of how people buy things.

Part of this is an issue of fairness. As some brick-and-mortar retailers struggle to survive, online competitors offer convenience and selection that can be difficult to match. There’s little to be done about that, but the state should even the playing field by demanding that buyers are at least subject to the same level of taxation on every purchase, whether it’s in person or online.

Then there’s the issue of local government viability. Cities and counties rely on sales tax to pay for essential services, from parks and policing to the filling of potholes, but they miss out on a key revenue stream in today’s economy.

A Missouri House committee was scheduled Wednesday to hear competing versions of legislation to begin taxing online purchases. These measures share similar goals, although differences might emerge on how an online tax relates to an existing local use tax and when local jurisdictions might need to give voter approval.

Another issue is whether Missourians should get income tax relief to offset any increased revenue from an online sales tax. State Rep. Bill Falkner, a former St. Joseph mayor, said income tax discussions are best left to the budget committee in order to take into account education funding, Medicaid expansion and other state needs.

We agree. An income tax cut would be nice, but it shouldn’t be the roadblock that keeps Missouri from joining the rest of the country in establishing an online sales tax.