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Editorial: Give states the power to collect out-of-state online sales tax
Here’s one tax-policy agreement Congress should reach: treat large, out-of-state sellers the same as local businesses when it comes to collecting sales tax.
Seattle Times Editorial
While members of Congress negotiate to avoid sending the nation off the fiscal cliff, they should be sure to include a proposal to give states the authority to collect sales tax from online retailers not based in their state.
For Washington state, the change could mean hundreds of millions of dollars in additional state and local sales-tax revenue. The tax is now often not collected when state residents buy from out-of-state retailers. Sales-tax collections are especially important in a state like Washington with no income tax. The Legislature is facing a projected $900 million deficit in the next biennium.
Residents from Washington or other states with sales taxes should pay their state’s sales tax whether transactions take place in a bricks-and-mortar store down the street or from a distant retailer on the Internet. Amending tax law to recognize the economic power of online retail is a good start.
Too often, consumers go to stores to pick out products yet avoid paying sales tax by purchasing the product from out of state on their smartphone.
Underscoring the point are sales figures from Cyber Monday. The Monday after Thanksgiving tends to be the biggest online shopping day, offering a powerful economic indicator for Internet-based retail.
Online sales among some of the largest U.S. retailers on Monday jumped 30 percent, compared with Cyber Monday 2011, according to data compiled by IBM’s Smarter Commerce arm, which surveys 500 online retailers.
Gov. Chris Gregoire is making this change in federal law a priority in her last two months in office. Her efforts are supported by a wide range of Washington state businesses and trade associations, not to mention other states in the same boat.
Despite more than a decade of unsuccessful attempts to fix this problem, recent signs point to bipartisan congressional agreement on the issue.
A subset of Congress bent on blocking anything that remotely resembles a tax increase should put their fears to rest. Collecting sales tax on Internet sales is not a new tax, but rather taxes that should have been paid all along.
Technically, people who purchase goods from out-of-state sellers that aren’t taxed owe a use tax. Few buyers pay it.
But the practice is a hemorrhage of tax revenue owed the state.
Washington could see an estimated $558 million extra in state and local taxes during the 2013-15 biennium and $934 million in 2015-17, according to the state Department of Revenue.
The taxes are owed. Time to ensure they are paid.