Wallingford proposes bill to collect sales taxes on online purchases

State Sen. Wayne Wallingford calls it a matter of fairness.

Opponents call it a tax increase.

The Cape Girardeau Republican introduced legislation to make it easier to collect sales taxes from online sellers who have no physical presence in Missouri.

The Main Street Fairness Act would help level the playing field for Missouri businesses while generating more tax revenue for state and local governments, Wallingford said.

Wallingford introduced the same legislation late last session, but it never made it out of committee.

Wayne Wallingford

"We didn't vote it out because we knew we did not have enough time to discuss it on the Senate floor."

'Competitive disadvantage'

The senator said brick-and-mortar stores in Missouri must charge state and local sales taxes on products they sell.

But online sellers who do not have a physical presence in the state legally do not have to charge such taxes.

"So that gives a competitive disadvantage to our local businesses," he said.

Marcie Freed shops for a jacket Tuesday at Guy's Big & Tall shop in Cape Girardeau.Andrew J. Whitaker

Local businesses support their communities, collecting the state and local taxes that fund public safety, transportation and other services, he said.

Cape Girardeau Area Chamber of Commerce president John Mehner agreed. He said his organization favors the bill.

Curt Johns, owner of Guy's Big and Tall shop in Cape Girardeau's Town Plaza, said he likes the bill.

Johns said he has lost sales to online, out-of-state competitors who don't have to charge Missouri sales taxes.

Johns said some people have come into his store to look at merchandise and left to buy that item from online sellers who don't charge Missouri sales taxes.

"I have customers come in my store to gather information so that they can go online and buy from my competitors. It's not fair for me to have all the answers and not make a sale," he said.

Johns added, "I even had one customer ask me why the big and tall clothes he ordered online don't fit and wanted me to tell him what he was doing wrong."

But not all local business owners support Wallingford's bill.

Horizon Screen Printing general manager Dru Reeves said he has "mixed feelings" on the issue.

On the one hand, Reeves said his company has "lost a lot of business to online sales." But Reeves said "instead of sitting around and complaining about it," he has sought to compete online.

"We do a lot of shipping," he said.

When he ships to out-of-state customers, he does not charge sales tax.

When it comes to personal purchases, Reeves said he regularly buys non-taxed items through Amazon, the giant online retailer.

Reeves said Wallingford's bill would amount to a tax increase on consumers.

Lost revenue

But Wallingford said state and local governments "lose revenue as a result of the failure to capture taxes that are owed."

The nonpartisan Missouri Budget Project, an organization that promotes tax and budget policies, favors the bill.

"It is a great step forward," said Mike Sutherland, the organization's policy director.

Sutherland said Wallingford's measure does not constitute a tax increase and would create fairer competition between Missouri businesses and remote, online sellers.

A University of Missouri study estimated Missouri's state and local governments would have collected an additional $358 million in 2014 if remote sellers had been required to charge sales taxes.

Wallingford said his 300-plus-page bill would not impose "a new tax or tax increase."

He said, "I just want to make sure we have a collection mechanism for an existing tax."

Currently, those who buy items online are supposed to pay a use tax in certain situations. But many people don't know that or refuse to pay it, he said.

"In 2011, we had 168 Missourians who knew their taxing duties and paid use taxes on items," Wallingford said.

Those taxes totaled just over $205,000.

Nationwide, only 2 percent of consumers self-report, he said.

Multistate agreement

Wallingford's bill would authorize Missouri to participate in the "streamlined sales and use tax" agreement.

Twenty-four states are parties to that agreement.

All of Missouri's bordering states, except Illinois, participate in the agreement, Wallingford said.

The agreement was a response to a 1992 U.S. Supreme Court decision that states can apply sales taxes only to companies with a physical presence in that state.

As tax-free internet sales expanded nationwide, states increasingly have sought to collect tax money from such transactions.

Over 3,200 sellers, large and small, now voluntarily charge sales taxes for the states participating in the agreement.

Craig Johnson, executive director of the Streamlined Sales Tax governing board based in Wisconsin, said his organization has contracts with certified service providers who handle the computerized tax calculations for participating businesses.

Since October 2005, when the agreement went into effect, more than $2.6 billion has been collected in sales taxes, Johnson said.

But Johnson said his organization legally cannot force remote sellers to charge sales taxes.

A matter for Congress

Ultimately, it would require an act of Congress or a new decision by the U.S. Supreme Court to mandate the levying of such taxes, Johnson said.

The U.S. Senate approved a bill in 2013 that would have empowered states to tax sales from out-of-state retailers. Missouri's two senators -- Roy Blunt and Claire McCaskill -- backed the bill. But the measure languished in the House.

U.S. Rep. Jason Smith of the 8th District has not taken a stand on the issue, said Mark Roman, Smith's deputy chief of staff.

Roman said the House may look at the issue in the future as part of tax-reform efforts.

Anti-tax advocate Grover Norquist, president of Americans for Tax Reform in Washington, D.C., believes there is little support for such a measure in the House.

Norquist said efforts to collect sales taxes from remote sellers amounts to "taxation without representation."

Norquist said, "It is completely unfair for politicians in one state to tax people in another state."

Buyers and remote sellers in other states don't benefit from Missouri sales taxes. They don't receive public service from such taxes, he said.

Norquist said politicians of both parties favor levying a tax on people who are not their constituents.

"Every politician loves the idea of free money," he said.

mbliss@semissourian.com

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