Many American consumers don’t like the idea of having to pay state sales taxes on Internet purchases, but some members of Congress have other ideas. Both the U.S. Senate and House have introduced bills that would set up a system states could use to collect sales taxes on most products bought online.
The U.S. Supreme Court in 1992 ruled that mail order companies didn’t have to collect state taxes unless they had a physical facility in the state. But action by Congress could change the rules of the game.
Louisiana is one of a few states that already have laws on the books that say state sales taxes should be paid on online purchases. Unfortunately for state and local governments, enforcement is almost nonexistent. Getting tough on those collections is definitely a case of “easier said than done.”
The Louisiana law has been on the books since 1934, long before the Internet age dawned in this country. It was enacted to prevent out-of-state retailers from having an advantage over in-state companies, but enforcement has been almost non-existent.
Current law says online purchasers are supposed to either pay online sales taxes after the sale or when they pay their state income taxes. The state Department of Revenue has forms online that can be used to keep a record of Internet purchases. The sales tax rate is 8 percent, and 4 percent of that is redistributed to local governments.
“When out-of-state vendors do not charge sales tax to purchases, Louisiana state law requires the shopper to report and pay the Consumer Use Tax,” the state Department of Revenue said in a Nov. 30 news release.
The Legislative Fiscal Office said collections of the consumer use tax total only about $1 million per year. Meanwhile, The Advocate of Baton Rouge reported that a recent study found state and local governments in Louisiana would lose $352 million this year in lost online sales taxes.
The National Conference of State Legislatures estimates states will lose $23 billion in sales tax revenue in 2012 if steps aren’t taken to collect online taxes. And November was a banner month for online sales. They totaled nearly $19 billion, which is up 15 percent over the same period last year.
A bipartisan group of U.S. senators has introduced the Marketplace Fairness Act that would enable state and local governments to do a better job of collecting taxes on Internet sales. It was referred to the Senate Committee on Finance back in July. The House has a similar version of the legislation, but neither has been heard in committee.
Neal Osten, director of the Washington office of the National Conference of State Legislatures, told the Los Angeles Times, “We believe at some point Congress will say … ‘This is something we can do for the states that does not cost the federal treasury a dime.’ I think in the end, that is going to be the winning argument for Congress.”
A spokesman for U.S. Sen. Mary Landrieu, D-La., told The Times-Picayune of New Orleans local merchants are at an “unfair disadvantage” when competing against large, online companies when sales taxes aren’t collected. U.S. Sen. David Vitter, R-La., needs to review the legislation before taking sides, a spokesman said.
Ask online shoppers how they feel about tougher enforcement of sales tax collections, and most will tell you it would remove much of the incentive for making Internet purchases. Some say the combination of shipping charges and sales taxes would make products too expensive.
If U.S. Rep. Charles Boustany, R-Lafayette, is right, consumers don’t have to begin worrying anytime soon. Boustany, who represents this corner of the state, doesn’t see quick enactment of an online sales tax bill. Passage could be two or three years down the road, he said.
Boustany is a member of the House Ways and Means Committee that would probably hold hearings on the proposed legislation. He said the committee has been discussing tax reform since January and the online tax is “one of a host of issues involved in the deliberations.” He said Congress definitely needs to create a level playing field for small businesses, but enforcement is a problem when it comes to collecting online sales taxes.
“We are looking at the entire tax code, and it is a complex issue,” he said. “The sentiment is to do a comprehensive rewrite of the tax code,” and he said the online sales tax legislation is just one part of that.
Jindal’s opposition to higher taxes would also be a factor since Congress is only giving states the tools they might need to enforce online sales tax collections. They would have to take the initiative. Jindal opposed state legislation last year that was designed to capture more revenues from Internet sales, as well as other efforts to raise or renew taxes.
Something tells me stricter enforcement of online sales tax collections won’t happen overnight. However, the argument that local retailers are currently at a disadvantage can’t be ignored. They are the backbone of this nation and this state’s economy.
Jim Beam, the retired editor of the Lake Charles American Press, has covered people and politics for more than ÿve decades. Contact him at 494-4025 or [email protected].