State task force examining potentials of Internet sales tax

JACKSON: A state task force is quietly taking a hard look at the pros and cons of forcing Internet retailers to comply with a Mississippi law that mandates they collect sales taxes on items they sell online to buyers in the state.

A key question is whether taxing cyber sales is a true pot of gold at the end of the rainbow or a big hassle not worth the expense, as a State of Maryland study concluded in 2011.

How much Mississippi is losing in tax revenues is a big question without a consensus answer. Some studies put the range at between $40 million and $200 million, while a survey cited in an April Associated Press story tagged the cyber revenue loss at $616 million.

Bob Neal, a senior state economist with the Institutes of Higher Learning, has not seen any figure with which he is comfortable. He said he thinks the $40 million may be too low and the $200 million too high. “I am not any more confident in either number, to tell you the truth,” Neal noted.

internet-sales-tax-graphic_rgbHe has brought the task force together but is unsure its work will produce any sort of revenue projection. “The task force is exploring what is the situation and, frankly, is it an addressable issue,” he said.

He said Tuesday the task force, made up of economists, state officials and private sector representatives, is in its infancy but plans to complete its work before the next legislative session.

The conclusions of the task force could prove timely. At least one key legislative leader intends to push for collecting the state’s 7 percent sales tax on all cyber sales as a way to generate money for maintenance of the state’s highways and bridges.

Rep. Robert Johnson III, a 20-year state legislator and chairman of the House Transportation Committee, said he wants a sales tax on Internet purchases to be among the options lawmakers consider for funding the growing backlog of road and bridge maintenance needs. He said his first preference is to replace the fixed 18 cents-a-gallon tax on motor fuels with a rate tied to either the price per gallon of motor fuel or to inflation. Outside of that, he is ready to pursue a cyber charge, he said.

“If people are not inclined to raise that tax (on motor fuel), we have to look at the Internet,” Johnson said in a recent interview.

Neal’s plan is to have some answers to questions likely to be raised during the legislative session. The study won’t be purely dollars and cents, however.

Some of the impetus for creating the task force came about through the urging of Mississippi’s brick-and-mortar retailers to look at leveling a playing in which cyber sellers with no physical presence in the state have the advantage of not assessing buyers the 7 percent tax. “This is one of the fundamental issues that I think inspired” formation of the task force, Neal said.

“It is an issue local merchants are passionate about – and for good reason.”

Neal emphasized that Mississippi’s demographic of low-income people without access to credit cards (a key requirement for online buying) and low Internet connectivity will be important factors.

Further influencing any finding will likely be the predominance of business-to-business Internet sales. It is estimated that nationally, business-to-business accounts for 92 percent of cyber sales. Neal said he figures Mississippi is not too far above or below that estimate.

The likelihood is that most businesses are paying sales taxes on the purchases of items not exempted from the taxes, Neal said.

So the percentage of sales that the task force will focus on will be much smaller than many people would think, according to Neal.

It would not greatly surprise him, he said, is Mississippi’s study reaches the same conclusion as Maryland’s 2011 study: Legal challenges and uncertainty over the amount of money that would be raised make the endeavor questionable.

The study by the Maryland Comptroller’s Office concluded retailers outside the state would not collect the tax and remit to the state absent a federal law forcing them to do so.

Congress may be in a mood to do just that. It is considering a measure dubbed the Marketplace Fairness Act mandating collection of taxes on online sales. Even Mississippi Gov. Phil Bryant has bended some on the issue, having dropped his previous objection to a cyber tax and notified U.S. Sen. Thad Cochran (R-Miss.) he would not oppose passage of the measure.

Nationally, sentiment is growing to tax Internet sales, said J. Craig Shearman, a spokesman for the National Retail Federation.

“We definitely feel” the issue is starting to turn, he said Tuesday. “We see a lot of things coming together.”

He put the value of retail sales taxes going uncollected nationwide at $25 billion.

 

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One Response to “State task force examining potentials of Internet sales tax”

  1. State task force examining potentials of Internet sales tax ← Delmarva News Says:

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