Forcing online retail giants like Amazon and Overstock to collect sales taxes from customers would require a tradeoff that Mississippi is not yet prepared to make.
On one hand, the state could gain in the neighborhood of $300 million annually.
But on the other, it would need to revamp its sales tax system to meet the specification set by Congress, the only governmental body authorized to mandate an across-the-board sales tax on cyber sellers.
“Our sales tax code would have to be completely rewritten to comply” with what is known as the Streamlined Sales Tax Agreement, a blueprint adopted by 44 states and the District of Columbia to simplify sales and use tax collection. Mississippi has so far declined to become a full member, opting instead to be an “advisory” state.
Under the streamlined guidelines, the states could have only one rate of tax, with the exception of levies on groceries, drugs and motor vehicles, said Kathy Waterbury, spokeswoman for the Mississippi Department of Revenue.
The list of discounted sales tax rates that would have to be eliminated includes purchases of farm tractors and other farm equipment, purchases of manufacturing materials and purchases of pulpwood materials, according to Waterbury. “You can’t have an exempt rate. If you go to 7 percent you have just raised the taxes on three of the most important industries in our state.”
Gone also would be the discount allowed on items such as movie tickets and other entertainment expenses, she added.
“One of the things about the streamlined sales tax is you have to follow all of the provisions or don’t belong,” Waterbury said. “It’s 100 percent or nothing.”
“Sourcing” would also become an issue by altering long-held arrangements with municipalities. The state returns to cities slightly more than 18 percent of sales taxes collected within each city. But under the streamlined sales tax, the remittance goes to the destination of the sale – not where the sale taxes place. For instance, furniture bought in Jackson and delivered outside the city would eliminate Jackson’s share of the sales tax, Waterbury said.
The other wrench in the deal would be the streamlined agreement’s requirement for across-the-board payments to both online and brick-and-mortar businesses to cover their expenses of collecting and processing the sales tax. Right now, the state gives retailers $50 a month to collect the sales taxes and remit them to the Department of Revenue, at a cost of about $13 million a year.
But no one is sure what the actual cost would be for the online retailers to collect and process sales taxes on items sold to Mississippians, Waterbury said, and noted the state would be on the hook for covering all of those costs
In the end, considering that physical and cyber retailers would have to be paid identical amounts, the costs could exceed the $300 million a year the state expects to gain from expanded sales tax collections, she said.
“If we’re losing $300 million is it going to cost us $500 million” to implement? “We don’t know that.”
Crowell Armstrong said he thinks he knows. “I can promise you it won’t be $300 million,” said Armstrong, president of the Mississippi Retail Federation, one of many groups pushing to force online retailers to collect sales taxes.
“With the technology we’ve got today, it could be done real simple,” he said.