Elk Valley Times

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Charging internet sales tax

Posted on Monday, September 17, 2012 at 3:51 pm

Taxes have become a major issue in American politics. Should the wealthy pay more? Should the middle class? Should the tax code be reformed?

And, of course, there is the question of Internet sales. Should residents of Tennessee be required to pay sales tax on purchases made online.

We believe the answer is yes, and the law is on our side.

Amazon has found itself in the middle of this debate. The company does not charge sales tax on purchases and the burden to pay the sales tax to the state falls on the consumer. In April the company began to distribute letters reminding customers in Tennessee that state law — the consumer use tax — does require them to pay sales tax on their purchases. Last October, Amazon and the state reached an agreement under which the online retail giant will begin collecting sales tax in 2014.

We appreciate Amazon. The two warehouses the company is building, one in Murfreesboro and one near Lebanon, will provide 1,500 or more much needed jobs. However, there are two major issues with Internet retailers not collecting the taxes.

First is simply the money involved. There were, under the auspices of the consumer use tax, 8,766 voluntary filings last year, totaling a bit more than $3 million in sales tax revenue for the state of Tennessee. Don Bruce, an economist at the University of Tennessee, estimated that unpaid sales taxes from Internet sales totaled more than $400 million last year.

That money would be useful.

The second issue is that by not collecting sales tax, which will likely not be paid by the consumer, Amazon and other Internet retailers are given an unfair advantage over struggling local businesses.

Local merchants already often charge higher prices than Internet merchants. Overhead, ranging from paying for a bricks-and-mortar location to supporting your child’s Little League team, drive prices up. Then, they collect sales tax on your purchases and pay that to the state. Again, that creates the illusion of a higher price.

The result? An unfair competitive advantage as consumers turn to E-bay, Amazon and other retailers to pay less and pay no taxes.

The true result though, is more harmful. Tax money that should go to better roads, better schools and better services are not collected. As a result, we have less money to fund that which makes our lives safer.

Our view is simple. Require Internet retailers to collect sales taxes and pay them to the state

-The Daily News Journal, Murfreesboro