Editorial: Sales tax for online buys long overdue
Congress considers so few commendable bills with bipartisan support that when one comes along, members ought to send it to “the shopping cart,” and complete the transaction as quickly as possible.
And so it goes with the Marketplace Fairness Act.
The bill would place online businesses and those housed in stores on equal footing when it comes to collecting sales taxes from customers. Stores have been at a disadvantage since the advent of virtual shopping because they have to tack on the sales tax, which makes their products more expensive. As online shopping continues to grow, this inequity widens.
Congress has been trying to solve this problem for two years, and now it looks like it has sufficient support. Last Friday, the Senate gave the bill a test run by passing it as a nonbinding amendment to its budget. The vote was 75-25, with 25 Republicans on board, including Idaho Sens. Mike Crapo and Jim Risch. Democratic Sens. Maria Cantwell and Patty Murray also voted for it.
However, it’s unlikely that the Senate budget will survive the partisan wrangling in Congress, so the bill would need to pass as stand-alone legislation. And it should.
It isn’t right that shoppers can visit a store, examine a product and return home to order it online to avoid the sales tax. “Showrooming” hurts businesses, and state and local budgets. Furthermore, it shifts the tax burden to property and business levies. Washington state already taxes businesses more than other states. The Department of Revenue says the state collects only about one-half of what it’s due from online and mail-order sales.
Critics of the bill call it a new tax, which isn’t true. The sales tax already exists; it’s just that government has put the burden on brick and mortar businesses to collect it, while some online businesses skate free. Twenty-four states, including Washington, are already parties to the Streamlined Sales and Use Tax Agreement, in which states agree to cooperate with each other in collecting taxes from online sales. This bill would scoop up the remaining states.
Critics also claim that collecting the tax would be complicated, but that argument has lost steam since the advent of more sophisticated software. It’s similar to the technology that allows online businesses to collect customer information, ship products and track their progress all over the globe.
To allay the criticism that the bill would cripple small online vendors, the sponsors raised the collection exemption from $500,000 to $1 million in annual sales. That’s too high ($1 million in sales is a lot), but if it hastens passage of the measure, it’s an acceptable compromise.
If adopted, the bill would raise an estimated $23 billion annually, or about $480 million over a biennium in Washington. That’s a significant chunk of money for a state that’s coping with a $1.2 billion shortfall and a long-term mandate to spend more on basic education.
The bill is endorsed by retail associations and mayors and governors of both parties. It’s eminently fair and long overdue. Members of Congress just need to click “yea.”