Editorial: Let’s level the playing field for local, state retailersNow that we’re done with another busy holiday shopping period, there’s an online sales loophole that needs to be closed for some good reasons.
Now that we’re done with another busy holiday shopping period, there’s an online sales loophole that needs to be closed for some good reasons.
In 2012, the loophole cost Wisconsin more than $150 million in sales taxes. In addition, it’s penalizing retailers who set up and do business in the state and are obligated to collect sales tax from customers.
It’s up to Congress to fix this unfairness. The quick-and-easy solution would be the passage of the Marketplace Fairness/Equity Acts.
This would require online retailers to collect sales taxes across state lines. The acts would restore fairness while allowing states to collect needed revenue.
States now lack the tools to enforce sales-tax collections. A person in River Falls, or anywhere in Wisconsin, can sit at a computer and buy things from an online retailer — almost always, no sales tax is charged.
What many people don’t realize is that they still owe the sales tax, but under current law, you are expected to report it on your state income-tax form. Most people either don’t know they should be paying or just ignore the requirement.
States across the country lose an estimated $23 billion through this gap. U.S. Sen. Mike Enzi, a Wyoming Republican, calls the problem “the most overlooked tax loophole.”
According to the state Department of Revenue, the Badger state’s $150 million loss includes $62 million from online sales by out-of-state retailers to Wisconsin buyers. The remainder is from other remote seller-to-buyer commerce.
It’s bad enough that the state is losing all this money, but consider the unfairness of having local store owners attempting to compete with out-of-state online retailers. The poor local store owner is required to add sales tax to the transaction, while online competitors can sell without the tax and therefore sell for less.
The current situation goes back to a 1992 Supreme Court ruling that said businesses without a substantial physical presence in a state are not required to collect sales taxes for that state.
For example, how could a national online retailer be expected to figure sales taxes for the nearly thousands of different sales tax jurisdictions nationwide? State rates differ, county rates differ, city rates differ and many states exempt certain items. Minnesota, for instance does not charge sales tax on clothing.
Today, however, the insurmountable problem of 1992 can be easily solved with the correct software — this software automatically calculates various tax rates based on a buyer’s location.
An attempt to attach the legislation to a defense appropriations bill failed late last year. The act, however, deserves an “up or down” vote on its own.
Wisconsin’s senators and representatives should stand behind the bill that would raise money for the state and give local retailers a level playing field.