Our View: Online sales tax collections should be shared with municipalities

August 3, 2018 10:19:31 AM

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Mississippi cities want their slice of the annual $50 million to $75 million in new sales tax revenue created by the U.S. Supreme Court's ruling in June that requires big online retailers to collect state sales tax. 

 

During Thursday's meeting of the Columbus Exchange Club, Columbus City Attorney Jeff Turnage iterated the city's position: The new revenue should be treated no differently than regular sales tax revenue, which would mean 18.5 percent of those sales tax collections would be returned to the cities were those purchases originated. 

 

On July 17, the city sent a resolution to the Legislature making that request. 

 

The city makes a pretty good argument. Sales taxes are sales taxes and should be distributed in the same manner. 

 

As Turnage pointed out, online retailers compete with the brick-and-mortar stores in cities and towns throughout the state. Until the Supreme Court decision, those online retailers had a competitive advantage because no sales tax was applied to those online purchases. While the high court's decision has served to level the playing field by eliminating that advantage, every online sale (and the sales tax that accompanies it) returns nothing to the city.  

 

When a person buys an item at a local store, 18.5 cents for every tax dollar goes back to the city's general fund. When a person who lives in the same city buys online, the city receives no portion of that sales tax. 

 

It seems fair that this new revenue should be administered like any other sales tax. 

 

There are two major obstacles, however. 

 

First, is the Legislature's plans for the money. Gov. Phil Bryant is expected to call a special session to address the states' road/bridge crisis. It will take an estimated $3.75 billion to put our roads/bridges in good working order. Legislators are already considering how to come up with that revenue and you can bet the online sales tax revenue will be a big part of that plan. Legislators aren't likely to part with that 18.5 percent. They, too, have a good argument. The state's roads/bridges crisis impacts all Mississippians. Using this new revenue to address such a problem is reasonable. 

 

But even should the cities convince the Legislature to share those funds, a far bigger obstacle emerges: How to do it. 

 

It's simple enough to distribute regular sales taxes, which are collected by the cities and sent to the state. 

 

Online sales tax distribution is potentially more complicated, since those taxes are delivered directly from the retailers to the state. Distributions to the state by online stores would have to be accompanied by a report detailing the amount of taxes collected for each municipality. 

 

While this may place an additional burden on the online stores, these companies obviously have billing addresses for each order and already track sales taxes for each order, so such a report should be possible. These are tech companies, after all. 

 

Sales tax in our state was set up to tax consumption and to return a portion of that money back to the cities in which the money was spent. We see no problem with that system. 

 

Online sales tax should be shared with municipalities no differently than traditional sales tax.