Online shopping issue Sales tax collections begin, despite Congress’ inertia

Published 12:00 am Thursday, January 30, 2014

RALEIGH — The writing may well be on the proverbial wall when it comes to the collection of state and local sales tax from online sales.
If so, it comes as no surprise that Congress will have put very few of the words on that wall.
For years, state legislators of both political parties — in North Carolina and elsewhere — have pushed for Congress to pass a law that would require sales taxes to be collected from online sales in the same way that they are collected from brick-and-mortar retailers.
And for years, Congress has done nothing.
States want federal legislation because they have traditionally needed something referred to as “nexus,” a physical presence in the state by the online retailer, to force that retailer to collect the sales tax.
Some members of Congress, prone to their well-established fits of illogic, have accepted arguments that federal action amounts to a tax increase.
Those arguments ignore that states like North Carolina already tax online sales transactions, asking that consumers, rather than retailers, settle up when they file yearly state tax returns.
That enforcing the law and collecting the tax is virtually impossible without the cooperation of retailers, or a federal law requiring them to collect it, is not the point.
The tax is on the books.
Congressional delay has essentially acted as federal sanction to ignore state law.
Meanwhile, states have seen their sales tax bases erode as more retail transaction occur over the Internet. And brick-and-mortar retailers complain that Congress’ inaction has left them at a competitive disadvantage.
None of that may matter much longer.
A couple of weeks ago, Internet retail giant announced that it would begin collecting sales taxes in North Carolina. The decision came after the U.S. Supreme Court declined to hear an appeal by Amazon and fellow Internet retailer of a New York Court decision upholding a state law requiring that they collect and remit sales taxes.
Legislative economist Barry Boardman recently told state legislators that the decision by Amazon would mean an additional $20 to $30 million for state tax coffers and as much as $13 million for local governments. Looked at another way, the figure represents the taxes collected on sales annually that, over several years, had migrated away from brick-and-mortar retailers to a single Internet retailer, albeit the powerhouse of Internet sales.
Last spring, the U.S. Senate did approve legislation that would subject a wide swath of Internet purchases to state sales taxes.
Since then, the bill has languished in the U.S. House.
No doubt, the big box retailers and the small mom-and-pop shops that have always collected sales tax would like to see both chambers of Congress finally act and do something to create a uniform system of sales tax collections.
That may happen one day.
But it is easy to come to the conclusion that, by the time it finally does, Congress’ action will be about as meaningless as most of its knocking about these days.
Scott Mooneyham writes columns for Capitol Press Association.