Taxing Internet sales as a matter of fairness

Added December 11th, 2014 by Alicia Guevara Warren | Email This Entry Email This Entry
Alicia Guevara Warren

Nowadays, with a growing number of people shopping online, it makes sense to collect sales taxes on the items purchased – if the item was bought at a store nearby, we would have to pay the sales tax.

So, what’s the difference? The difference is that over the past year an estimated $482.4 million worth of sales and use taxes from remote sales will go uncollected by the state. The majority (60%) of that is due to e-commerce.

After stalling on the House floor over a year ago, there appears to be support for moving forward with a package of bills (HB 4202-4303), commonly referred to as the “Michigan Main Street Fairness Act,” which would require the collection of the sales and use tax on Internet sales. The bills would not only bring fairness between brick-and-mortar businesses and Internet retailers, but the move modernizes the state’s tax structure to reflect current consumer trends. The Senate on Thursday passed similar bills, SB 658 and 659, on a 21-16 vote, keeping the issue alive in the lame duck session.

Currently, Internet retailers, such as Amazon, have an unfair advantage because consumers can avoid paying the sales tax and end up paying less for goods than they would have in a store. The Michigan Main Street Fairness Act would level the playing field for the state’s brick-and-mortar businesses and improve competition.

Another added benefit the package brings is tax fairness for low-income people in the state. Those who shop online tend to be more affluent  and are not in need of a tax break. Requiring a sales tax to be collected on Internet sales reduces the inherent regressive nature of the sales tax.

Finally, the Michigan Main Street Fairness Act provides much needed revenue in a way that updates the state’s tax structure. Although, it is estimated that the bills will only bring in $50 million – the state could actually collect more if Congress acted on federal legislation – something is better than nothing when it comes to funding already underfunded schools and communities that have undergone a decade of cuts.

In these last days of the legislative session, we urge House lawmakers to support the passage of the Michigan Main Street Fairness Act to provide a level playing field and modernize the state’s tax structure, but not as a way to provide cover for a road funding shell game.

— Alicia Guevara Warren

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