Tuesday has been dubbed State Retail Day at the state Capitol. Local merchants will be visiting with lawmakers about their priorities, especially Internet tax fairness.
Nationally, the Marketplace Fairness Act would solve a lot of problems for traditional merchants and local governments. It has passed the U.S. Senate and is pending in the House.
The bill would require large Internet retailers to collect state and local use taxes on online sales and send those collections to states.
That’s not a tax increase. It’s simply moving the responsibility for collecting a long-standing tax to the merchant in the same way that traditional brick-and-mortar merchants collect sales taxes.
It also isn’t an unfair application of a tax on out-of-state online sellers, as some people describe it. The taxes are owed by local consumers (not the merchants). Those consumers expect local government services that are funded with sales and use taxes, such as police protection and street repair. It’s a local tax paid by local consumers The only issue is how it is collected.
Currently, states can only collect the taxes by what amounts to an honor system. Some, but not all, Oklahomans pay their online use taxes with their annual income taxes, but a tremendous amount of due taxes never get paid.
That robs state and local governments of needed revenue. If you are concerned about public safety funding or cuts in arts programs in the pending Tulsa city budget, start by writing your congressman about the need for Internet tax reform, which would go a long way toward improving the city’s revenue situation.
The inequity of the situation essentially puts local merchants — the people who employ your neighbors and sponsor your children’s Little League teams — at an unfair price disadvantage. They have to collect sales taxes of up to 10 percent, and their online competitors do not. That’s why the retailers are spearheading the issue.
At the state Capitol, House Bill 2720 is pending before the House of Representatives. The bill would create a mechanism for using state revenue from improved Internet tax collections to offset the revenue losses from state income tax cuts. The House and Senate have passed the measure in different forms with no one voting against it in either chamber.
HB 2720 is a solid proposal, but the real answer to Internet tax inequities isn’t going to be found in Oklahoma City. The answer is in Washington, the Marketplace Fairness Act, which is far overdue.