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Government officials demand sales tax for items bought online

Coinciding with many online holiday sales, state and national officials are pushing for a uniform sales tax applied to online retailers to ensure equity with Main Street businesses.

“All I am saying is level the playing field and let the consumer do what they want to do, and it’s a win-win-win situation,” said Mass. Treasurer Steven Grossman, who supports change on the federal level.

U.S. Senators Mike Enzi, Dick Durbin and Lamar Alexander are sponsoring a bill that would equalize consumers’ motivation to engage in retail shopping and online shopping.

Grossman said he favors the bill, entitled the Main Street Fairness Act, and that it would overturn a Supreme Court ruling from 1992.

The court case, Quill Corporation v. North Dakota, stated companies could not be required to collect taxes on sales made in individual states unless they had a place of business in that state, he said.

“If they do not have a place in that state, they do not have to collect sales tax in those states,” Grossman said.

Bill Rennie, vice president of the Retail Association of Massachusetts, said the growth of Internet sales has increased too much for this law to remain applicable.

“The reason we want to change it now is because online sellers are given a 6.25 percent head start over local sellers and businesses,” he said.

Rennie said the policy change is all about fairness.

“If a local retailer has to have a sales tax in Massachusetts, an online company should do the same,” he said. “If you don’t, you put the local retailer who pays all these taxes for Massachusetts behind.”

Grossman said he would like to uphold consumers’ abilities to make purchases however they want, without the influence of incentives.

“I absolutely respect the desire of consumers to use their hard-earned money in the wisest way they can,” he said. “They should be able to buy whatever they want and wherever they want.”

Grossman said the Enzi-Durbin-Alexander Bill would allow the state to collect the sales tax revenue from the online companies.

In 2011, Massachusetts would have collected $387 million of sales taxes from online companies, according to a study released by Cape Ann Economics on Nov. 13.

Grossman said this additional revenue could be invested in the Commonwealth’s infrastructure.

“In my own view, we should take the money we raise and invest it in the transportation and infrastructure of the state,” Grossman said. “It could help the T and ensure economic success throughout Massachusetts.”

Rennie said his association has been pushing for this bill since before the holiday season.

“We wanted companies to collect it [the sales tax] as soon as possible,” Rennie said. “If it’s passed by Jan. 1, that would be ideal, but if not, as soon as possible.”

Randall Ellis, a professor of economics at Boston University, said online companies should collect sales taxes to help maintain revenue going to the Commonwealth.

“The state relies on sales and income taxes,” he said. “As more and more people buy online, the percentage of sales tax paid declines, which makes it harder to support state programs such as highways, police and schools.”

Ellis said he also sees drawbacks to the bill.

“The main drawback is that people don’t like paying taxes,” he said. “There will be more incentives for people to ship items to states that don’t have any sales taxes.”

Albert Ma, a professor of economics at BU, said tax increases are unpopular among consumers.

“Consumers typically dislike taxes, especially sales tax,” he said. “Those consumers who would ordinarily buy online may either pay a higher price or choose not to purchase at all if the uniform Internet tax legislation goes through.”

Ma said he is unsure as to how the law will be enforced.

“The real question is whether it is practical to collect taxes for transactions that happen on the Internet,” Ma said. “I guess I’d wait and see how it all plays out at both the state and federal levels.”

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  2. […] Government officials demand sales tax for items bought online. The Daily Free Press, Boston University. Nov 27, 2012 […]

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