Taxing internet sales is a popular topic in letters to the editor and opinion columns in the local media. One letter writer recently wrote “Let’s pass a law and tax internet sales.” The argument posits that it is not fair to local merchants to allow out of state internet sellers to enjoy a price advantage when these internet sellers do not collect a sales tax.
However, there is already a tax on these internet sales. It is called a “use tax,” and it has been the law for many years. Mississippi residents pay this use tax on vehicles and boats purchased outside Mississippi when they go to register them in the State. This licensing process provides the mechanism for collecting the tax.
However, there is not a similar licensing mechanism for collecting the use tax for run of the mill internet purchases such as books, clothing, cameras, furniture, computers, equipment, sporting goods, and jewelry. In the past, a purchaser of internet goods would be required to go down to their local tax office, fill out a form, and make the payment of the use tax.
However, for tax year 2012 the Mississippi Department of Revenue has modified the state income tax forms to allow/require taxpayers to pay the use tax as part of their income tax filing. Line 26 on Form 80-105 (Mississippi Resident Income Tax Return) requires the taxpayer to add an amount for the “Consumer Use Tax.”
The instructions for Line 26 contain this guidance “If during 2012, you made out-of-state purchases of goods or services that you used, stored or consumed in Mississippi and did not pay sales taxes to any state, you are required to pay Mississippi Consumer Use Tax at a rate of 7 percent of the purchase price.”
The instructions go on to state “An example of such purchases includes books, clothing, computers, electronics, furniture, household items and downloads of digital products such as music, movies, e-books and software.”
It will be interesting to see how many Mississippi taxpayers come clean and pay this use tax on their perceived “tax-free” internet purchases made in 2012. Years ago this item was on the income tax return, but few taxpayers reported such purchases. However, with the explosion of internet commerce and the ability of the Department of Revenue to learn of such purchases, it is likely that this simple line recently added to the tax return will collect funds for the State of Mississippi.
This is not a new tax. This is simply an attempt to further collection efforts of a tax that has long been in existence. One twist though—these use taxes go into the general fund of Mississippi and are not shared with local governments as are sales taxes.
I can see this question being asked during an audit or upon learning of shipments of untaxed purchases brought into the state, “Did you pay the use tax on internet purchases for which no sales tax was collected at the time of purchase?”
It will behoove Mississippi taxpayers to begin to keep track of their untaxed internet purchases so they can make an accurate report on their return for 2013. As for 2012, taxpayers will have to go back and review credit card or banking records and purchase invoices to determine the amount of their liability for the Consumer Use Tax for 2012.
» Jim Rosenblatt is the Dean of Mississippi College School of Law in Jackson, Mississippi.
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