November 12, 2011 in Opinion

Editorial: State stands to benefit from online tax reform

 

At a recent visit to a classroom at Shadle Park High School, Gov. Chris Gregoire was impressed with the students’ questions, particularly one from Nick Ritchie about collecting sales tax from online transactions.

“He was obviously thinking, ‘Where would there be a potential source of money?’ ” Gregoire said in a Spokesman-Review article.

Governors across the nation have been wondering the same thing. Now Congress appears to be moving in a bipartisan – yes bipartisan – fashion to level the playing field between online merchants and those housed in actual buildings.

The Marketplace Fairness Act, which has five Republican co-sponsors and five Democratic co-sponsors, would apply to all states that have sales taxes. It would double the reach of the current Streamlined Sales and Use Tax Agreement. Once implemented, the law would snag an extra $23 billion in revenue annually, including about $483 million over the next biennium in Washington, according to the state Department of Revenue.

Despite its opposition to state-by-state efforts to collect taxes from online sales, Seattle-based Amazon will not fight this, saying it prefers uniform national standards. The nation’s largest online retailer announced strong support for the bill on Wednesday.

However, eBay hammered the effort, saying it would put its vendors at a disadvantage against big retailers. But there is a tax collection exemption for online businesses that register less than $500,000 in annual sales.

So-called brick-and-mortar businesses have complained for years about being put at a disadvantage because they have a greater tax collection burden than out-of-state online competitors, who could lower prices in lieu of charging the sales tax.

When online sales were small, this disparity wasn’t worth addressing. But virtual shopping has exploded, and consumers have been eluding taxation, forcing many local merchants to close their stores.

It’s only fair that the tax burden spread to online retailers.

In states with no income tax, like Washington, it’s increasingly important that sales tax be collected on all transactions. The state is currently facing a $2 billion budgetary shortfall, so bringing in $483 million more over two years would be a tremendous relief.

The Department of Revenue says the state collects only about one-half of what it is due for online and mail-order sales. If the bill were to become law, the state is set up to begin collecting these taxes 90 days after the signing.

The story is the same in many states.

That’s why the bill is endorsed by the National Governors Association and the National Conference of Mayors. That’s why Gregoire found that student’s question particularly intriguing.

Congress should capitalize on a rare moment of bipartisanship and press the send button on this bill as soon as possible.

To respond to this editorial online, go to www.spokesman.com and click on Opinion under the Topics menu.


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