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Clicking our way to an Internet tax

As I See It

Several weeks ago, state treasurer Marshall Bennett wrote a column for The Clarion-Ledger indicating his belief that merchandise sales over the Internet should be subject to sales tax. I have heard this subject discussed in the business community, with both views and intensity of emotion varying widely. Some feel that taxing Internet sales is logical and fair; others equate it to burning the U.S. flag.

Since we never knowingly avoid a controversy in this column, it sounds like this Internet sales tax issue is a field full of flowers for me.

Let’s start at the beginning. Internet sales are already taxable. Mississippi law requires that anyone who buys something out-of-state and does not pay sales tax at the time of purchase must file a “use” tax return and pay the equivalent of sales tax to the state at that time. This law is generally not enforced against individuals who are buying merchandise for their personal use and not in a business or for resale. Enforced or not, it is still the law.

Now to the question of whether Internet sales should be taxed. Arguments against taxation are generally based on the incorrect belief that this would be a new form of taxation. As previously noted, it is not. Some argue that the Internet is the salvation of the world and any form of taxation would interfere with its growth and development. There is also the argument that it would be difficult to implement and administer a tax on Internet sales. Since when has complexity of taxation ever been a consideration? Scan through the Internal Revenue Code sometime.

Those who are in favor of Internet taxation recite that sales tax is our major source of state revenue and, as the Internet grows, that revenue stream will be negatively impacted. Further, it is unfair to force “main street” businesses to collect sales tax when it can be avoided by ordering over the Internet.

The logical approach seems to be starting at the beginning. Does the State of Mississippi need to collect tax revenue to continue functioning? Yes. Should the state continue to rely primarily on the sales tax for revenue? Now the questions are getting harder. Sales tax is regressive since it is a tax on purchases of necessities and poor people spend all their money on taxed items whereas the wealthy do not. However, my subject is not whether sales tax is good or bad but rather whether Internet sales should be taxed. For this purpose we will assume that the state will continue to rely on sales tax for the lion’s share of its revenue.

Now we are at the real fork in the rode. If I buy a shirt at McRae’s, I pay sales tax on the purchase. If I buy the shirt over the Internet, I don’t pay the tax. Should I be rewarded for being wealthy enough and computer literate enough to buy on the Internet whereas my poorer and less electronically connected brethern are punished? I don’t think so.

Mississippi has gained some economic ground in the last decade. To keep the train rolling, we must improve the education system in our state. Improving education requires tax dollars. Most of those tax dollars come from sales tax. In my opinion, we should not create a loophole for the computer crowd that would harm our progress.

THOUGHT FOR THE MOMENT

When we’re born, we each start out as a blank canvas. God provides the paint and brushes. The rest is up to us. We can either make Rembrandts or rejects of ourselves. The lives we draw, the colors we choose — they’re all our decision.

— Chris DeMatteo, a mailman

Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. His e-mail address is cpajones@msbusiness.com.

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