More states have finally taken up a cause we have recommended for years — applying sales tax to online purchases.
In preparation for next year’s legislative session, Maine should be laying the groundwork now to join that cause.
Colorado, North Carolina and other states — all hard-hit by the recession of 2008-09 — have passed laws attempting to collect the online sales tax to which they are legally entitled.
That’s right, legally entitled.
While some shoppers dutifully record, report and pay sales tax on their online purchases, no one knows how many others either don’t know of the requirement or simply choose not to pay.
Other shoppers, meanwhile, may think a 1992 U.S. Supreme Court ruling relieved them of that obligation.
Not so. In fact, the court ruled that states could not force retailers to collect taxes unless those retailers have a physical presence in the state.
Residents still owe it, the courts said. States just can’t force retailers to collect it.
“The court’s reasoning was simple,” according to Stateline.org, a Web site devoted to state government. “There are just too many states, counties and cities using too many different tax rates and rules to expect retailers to keep track of it all.”
That may have presented a challenge in 1992. But, today, when retailers can track and collect the shopping preferences and demographics of millions of Americans, correlating addresses and sales tax rates for customers should be a breeze.
In reality, retailers like Amazon just don’t want to give up the competitive advantage they now enjoy over local retailers.
Which makes this an issue of fairness. It is simply wrong to penalize the person who owns and operates a local shop, who hires local workers and pays local taxes, to give a tax break to some warehouse operation in a different state.
So far, the states trying to apply what’s becoming known as the “Amazon tax” have adopted one of several strategies, according to Stateline.org.
The North Carolina revenue department has asked Amazon to turn over the names, addresses and purchase records of its customers so it can be sure they are paying sales tax.
Colorado, meanwhile, passed a law requiring “e-tailers” to notify customers annually of their purchase totals and remind them of their tax obligation.
New York, on the other hand, has argued that Amazon has a physical presence in the state because of its “affiliates” program, in which Amazon pays people across the U.S. to sell its goods on their sites.
Stateline.org estimates 15 other states are weighing laws of their own.
With more retail sales shifting to the Web, this problem is rapidly becoming too big for states — including Maine — to ignore.
And Maine’s budget problems are not going away. The 2011 Legislature is very likely to again face a multi-million structural deficit, meaning more cuts for local governments and schools.
Before they are forced to make cuts, state officials have a responsibility to seek revenue that is already owed to the state.
That means going after online sales-tax revenue now.