Legislators consider online sales tax

As more consumers are buying online, Missouri lawmakers are looking for a way to start collecting the millions of dollars in sales tax.

A bill would have Missouri join the coalition under which out-of-state businesses collect taxes for online purchases by Missourians.

Twenty-four other states are already part of this group, and St. Louis County Democratic Rep. Margo McNeil wants Missouri to join them.

“This will allow the state of Missouri to collect the taxes that are owed on out-of-state Internet companies,” McNeil said.

Under Missouri law, vendors are supposed to report online sales taxes on their income tax returns. Federal Tax Authority, a company that offers services to help businesses collect taxes, says this rarely happens.

Federal Tax Authority CEO David Campbell said this is causing a major tax revenue loss for the entire nation.

“Approximately $23 billion of sales tax goes uncollected each year,” Campbell said. “That includes both e-commerce as well as other remote retail, for instance mail-order catalogs or television sales.”

Just for Missouri, Campbell said loss estimates for 2010 are about $160 million per year.

If Missouri joins the Streamline Coalition, more than 1,400 companies from around the country would immediately start collecting tax revenue from Missourians purchasing their products online.

The sponsor of the bill to start collecting the tax is Rep. Doug Funderburk, R-St. Charles. He said this will be an important revenue source for local governments.

“And without that revenue, local services are going to diminish,” Funderburk said. “We’re going to see our infrastructure supports lose their funding, local law enforcement lose its funding, local fire services.”

Along with supporting local governments, the tax supports Missouri retailers, and the bill is essential for small businesses who don’t have online sales, McNeil said.

“This levels the playing field for our Missouri businesses,” McNeil said.

While many small businesses are rallying behind the bill, some big online retailers are fighting against it. National Tax Union Executive Vice President Pete Sepp said some big retailers are having problems with the bill because it is anything but simple.

“There are many complexity issues and there are many competitiveness issues,” Sepp said.

Retailers like Amazon, Ebay, and Overstock are against the bill. Overstock.com President Jonathan Johnson says it would be a lot of work to manage so many different state tax collections.

Besides the difficulty for large companies, Sepp said that it would be costly to small businesses. National Retailers Federation spokeswoman Maureen Rhiel said there is a plan to deal with this.

“A lot of the critics that say it would be costly actually don’t understand what the plan is, and the plan is that there be a cost reimbursement, or that you can outsource it,” Rhiel said.

While there is a plan for small businesses, many medium-size businesses are concerned with the responsibility for collecting the different taxes for so many states.

Jerry Cerasale, senior vice president for government affairs at the National Direct Marketing Association, said that duty creates a new burden.

“The liability portion on the marketer is huge,” Cerasale said. “These marketers don’t have a huge profit margin and this can be a problem.”

With states starting to regulate collection within, opponents say it takes away competition between states to keep taxes low.

Sepp, of the National Tax Union, said that it could lead to higher rates.

“That could spell difficulty not only for the small businesses collecting the taxes, but the individuals making the purchases,” Sepp said.

He also said the estimated tax losses are probably not as large as quoted.

Rhiel, of the National Retailers Federation, said the new revenue will not only help the businesses, but states.

“It’s a good thing for businesses in that state and its certainly a necessity for balancing the budget, which every state has a constitutional requirement to do,” she said.

With two weeks left in the legislative session, the bill is dead for this year. Funderburk estimated the bill’s passage will be a two- to three-year process.

– Missouri Digital News