Traverse City Record-Eagle

May 10, 2013

Editorial: Tax debate will decide winners, losers

Traverse City Record-Eagle

---- — If fairness was the only issue the states and the federal government had to consider when deciding whether to charge e-buyers the same sales taxes they pay at brick-and-mortar stores, the answer would be easy: yes.

It shouldn’t matter whether someone is buying a set of pots and pans in person or online; the tax obligation should be the same. Forget for now arguments against sales taxes, income taxes, property taxes, inheritance taxes or taxes in general. For the purposes of this discussion, they’re here to stay.

But there is a real debate in Washington and Lansing over imposing sales taxes on online purchases. State lawmakers are pushing measures aimed at bringing in the estimated $460 million in taxes from remote sales that should be going to the state this fiscal year alone. As things stand now, the vast majority of that will go uncollected.

But just about everyone agrees that whatever Michigan does, it won’t matter unless Congress acts first. The Michigan Treasury, which supports the state bills, says they won’t generate much revenue unless Congress gives states power to compel online retailers to collect state and local taxes for purchases made over the Internet.

Right now, states can only require stores to collect taxes if the store has a physical presence in the state. Amazon, for instance, does not. In lieu of that power, consumers are supposed to declare all “remote” sales — including items bought over the phone and on the Internet — when they do their tax returns and pay the 6 percent use tax.

As the twitterati would say, laugh out loud.

Republicans who generally demonize any and all new taxes yet support the internet sales tax effort have apparently convinced themselves this tax somehow doesn’t count. But 6 percent — the sales tax rate in Michigan, at least — is 6 percent, and a tax is a tax.

In fairness, it can be said this isn’t really a new tax, just a new way to collect sales taxes already owed to the state. Brick-and-mortar stores that pay property taxes and also levy sales taxes are at a real disadvantage to online retailers, and this is just an effort to even things up.

But it’s not that simple. No matter how you rationalize the fairness issues, the additional money is going to come from Michigan residents, and they’ll think it’s real enough. Michigan retailers may benefit, but don’t expect wholesale changes in buyers’ behavior.

If the bills in Washington and Lansing become law, there will be some winners (a few local retailers and state government for two), but no doubt many losers — Michigan residents who buy online.