Onlines sales taxes are a sticky issue

Should merchandise sold on the Internet be subject to state and local sales taxes?

If there were a simple answer to that question, it's very likely customers would already be forking over the extra cash.

Here's what we know:

Much of what is sold online currently is not subject to state and local sales taxes. There are exceptions, particularly when an online retailer has an outlet in a state where sales taxes are imposed. How much money is involved is hard to pin down, because not everyone agrees. Proponents of online sales taxes say nearly $19 billion in revenue is being lost nationwide this year alone. Projections show even larger figures, based on the expectation that online sales will soar if they remain free of sales taxes. But others say those estimates are overstated. In fact, a Missouri Chamber of Commerce official says online sales are already producing revenue in the Show Me State.

Most consumers who make online purchases like not having to pay sales taxes. Any effort to systematically collect sales taxes for online purchases would be regarded as a tax increase -- something most of us don't like. Thus, the negative impact of pushing for online sales taxes makes many politicians cautious about how this matter is handled.

Thirty-two states, including Missouri, have adopted a model agreement that would streamline all sales-tax collections as a first step toward making it easier to collect such taxes for online purchases. If put into practice, the result could mean less sales-tax revenue for many local taxing entities, particularly those like Jackson, Cape Girardeau and Cape Girardeau County, which derive the bulk of their operating revenue from sales taxes.

A shift in sales-tax distribution would occur for Missouri under the streamlining plan. Many other states already give sales-tax revenue to taxing entities where consumers reside. Missouri's sales-tax system, however, distributes this revenue to taxing entities where retail stores are located. Thus, the Cape Girardeau County area, which serves as a retail hub and draws consumers from a wide area, would stand to lose sales-tax revenue under the streamlining plan -- and online tax revenue as well, if the idea is to treat all sales taxes the same.

There are approximately 7,500 taxing entities across the nation, each with different tax rates and each with different items subject to sales tax. A big concern for collecting online sales taxes is how to keep all of this straight without placing a huge burden on merchants who would likely have the most responsibility for collecting sales taxes on Internet sales. A big unknown is how much the cost of collecting online sales taxes would be.

Proponents of online taxation say all of these wrinkles can be ironed out easily enough. Opponents aren't so sure. There is little doubt, however, that this issue will continue to get a lot of attention in the months ahead as state and local taxing authorities look for new sources of revenue.