It’s time for Mississippi taxpayers to stand up to tax dodgers.
It’s time to revolt against the State’s unfair and discriminatory behavior in the collection of taxes on retail sales.
You see, Mississippi law requires residents to pay taxes on all retail sales, except those specifically exempt. But, the State’s arbitrary and selective enforcement of tax collections provides a big loophole for tax dodgers.
Taxation of retail sales takes two forms. “Sales taxes” apply to retail sales of tangible personal property made by vendors within the state. “Use” taxes apply to retail sales of personal property by vendors outside the state for use within the state. Use and sales tax rates are the same.
Here’s how that works correctly. Freddy Joe goes downtown and buys a new car. The car dealer collects 5 percent sales tax. Donny Joe goes out-of-state and buys a car. When he comes home and gets his car tag, the tax collector collects 5 percent use tax.
Here’s where it becomes unfair and discriminatory. Freddy Joe goes downtown and buys a lamp. The store collects 7% sale tax. Donny Joe, who has access to the Internet, dodges taxes by purchasing the lamp from an out-of-state, online vendor.
This can happen because a U.S. Supreme Court ruling prohibits the State from forcing the out-of-state vendor to collect and remit use taxes. However, this does not excuse Donny Joe from paying, or the State from collecting, the taxes.
Unnoticed by most, in 2012 Mississippi took a half step to correct this problem by adding a line on its personal income tax return requiring taxpayers to self-report and pay use taxes. As a result, Donny Joe should self-report and pay use taxes on his lamp purchase.
Unfortunately for honest taxpayers, the State has not promoted or enforced this provision, even though willfully filing a fraudulent tax return is a crime.
Meanwhile, the number of tax dodgers grows exponentially as Internet sales take over much of the retail marketplace.
With Americans for Prosperity and other anti-tax groups doing all they can to coddle use tax dodgers, it appears the State will allow its discriminatory collection behavior to continue. This will only change when honest taxpayers stand-up and demand change.
It’s time. As more and more Donny Joes use the Internet to dodge taxes, the unfair burden on the Freddy Joes to fund government escalates. Sales taxes comprise 38 percent of general fund revenues, use taxes 4 percent.
There are practical steps the State can take to enforce collections. These include prosecuting tax dodgers who audits show filed fraudulent tax returns, making tax preparers culpable if they help prepare false tax returns, and providing a safe harbor tax payment for residents who make limited Internet purchases.
If the State fails to take the next step to enforce collections, taxpayers should seek a court injunction to stop all retail sales tax collections until an equitable collection process is put in place. Poor, elderly, and disabled taxpayers without Internet access or the credit mechanisms required for Internet purchases would be classes most likely to succeed.
Freddy Joe should not pay until Donny Joe does.
» Bill Crawford is a syndicated columnist from Meridian (email@example.com)