Companies could volunteer to pay sales tax for online purchases

JEFFERSON CITY (AP) — Kelly von Plonski’s bookstore is struggling to keep its doors open.

Sales at Subterranean Books, located two miles from Washington University in St. Louis, were down 25 percent in January. The recent economic downturn hurt sales, but von Plonski says the biggest burden on the store is the 9.4 percent sales tax it must pay to the city and the state — that its online rivals avoid.

“It’s the absolute main reason,” she said in an interview by phone this past week. “Hands down, no question.”

Subterranean’s online competitors do not have to pay sales taxes because a 1992 decision by the U.S. Supreme Court held that states cannot force companies to pay sales or use taxes unless they have a physical presence in the state.

Some Missouri lawmakers are backing legislation to let Missouri go around that decision by joining an agreement with 24 other states that makes it easier for companies to voluntarily pay sales tax on Internet purchases. If enacted, the measure could generate up to $210 million for Missouri’s cash-strapped budget. But it has little chance of passing, because lawmakers fear a political backlash from tax-averse voters.

Reps. Margo McNeil, D-Florissant, and Rory Ellinger, D-University City, have filed bills to have Missouri join the Streamlined Sales and Use Tax Agreement. Under that arrangement, Missouri would change its tax rules to allow Internet companies to charge state and local sales taxes on purchases shipped to Missouri. It would also simplify the system through which the companies voluntarily remit the taxes to the state Department of Revenue and would let companies that remit the taxes promptly keep up to 2 percent of the tax revenue they collect.

The House Tax Reform Committee heard public testimony on both bills earlier this month. McNeil said she had hoped to emphasize the positive effect the bill would have on small-town businesses and the state’s economy as a whole.

“My main thrust has been that this is evening the playing field for brick-and-mortar businesses,” she said. “The local businesses are the people who have most of the jobs for people in Missouri.”

Fiscal estimates included with the bills say the state’s Division of Budget and Planning “does not have an estimate of the sales tax revenues to be gained” from the proposals. But a 2009 University of Tennessee study concluded that Missouri could gain $210 million in 2012 by collecting sales tax on e-commerce, based on the state’s sales tax rates and estimates of future online purchases.

Ellinger said the impact of the sales tax disparity between online stores and local shops is felt even more sharply in more rural areas.

Debbie Miller, the executive director of the Moberly Area Chamber of Commerce, said not collecting the sales tax could give online stores an unfair advantage.

“It’s already easy enough to shop online,” she said. “To me it only makes sense for them to collect a tax they have to pay.”

Von Plonski and Miller both agreed that customers might have to pay more online if the tax were collected. But they said those tax dollars help cities provide services many people value.

“The sales tax is what pays for our fire department and our police officers,” Miller said. “I hate taxes just as much as the next person, but I know that we have to have a strong tax base in order to be a thriving community.”

Internet sales tax bills are HB52 and HB278

Weblink:

Legislature: www.moga.mo.gov

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