Taxes lost in cyberspace
Legislation moving through Congress could give states a bigger stake in shopping bonanzas like Cyber Monday. For Louisiana, the measure could mean millions of additional dollars for state government’s coffers, generating more money for education, health care and other services.
Whether Gov. Bobby Jindal would support the congressional efforts to capture more tax dollars from online and other out-of-state purchases is unclear.
When asked Monday about the issue of Internet sales and taxes, Jindal mentioned his opposition to a failed state legislative effort to step up tax collections on Internet purchases. Jindal said he consistently opposes burdening Louisiana families with additional taxes.
The governor did not respond Wednesday to a request to expand his comments on the issue.
Called the Marketplace Fairness Act and crafted by a bipartisan group of congressional lawmakers, the bill would allow states to pursue taxes on many transactions involving out-of-state companies, namely Internet businesses.
In a 1992 U.S. Supreme Court ruling on mail order companies, the court found that the companies did not have to collect state tax unless they had a physical presence, such as a warehouse or branch office, in the customer’s state.
The Marketplace Fairness Act would allow states to adopt their own laws aimed at collecting taxes on Internet and other sales, including mail order purchases. Amazon.com, one of the leading Internet marketplaces, is on board with the idea.
“A national approach is going to be necessary,” Donald Bruce, a business professor at the University of Tennessee, said Wednesday.
Bruce helped author a recent study that found that state and local governments are losing revenue through electronic commerce because of the difficulty in collecting the taxes tied to the purchases. The study found that state and local governments in Louisiana stood to lose $352 million this year in tax revenue on online sales.
Louisiana collects a sales or use tax on most purchases. A sales tax is a percentage of the purchase. A use tax typically is applied to purchases from out-of-state vendors.
People like Mark Martin, of Baton Rouge, who typically shop locally rather than on the Internet, pay taxes at the cash register. “I’m one of those oddballs that thinks we pay taxes for a reason so when my house catches on fire, someone’s there to put it out,” Martin said.
Many of those who do their shopping online, through a catalog or with a home shopping network are supposed to self report their taxes to the state Department of Revenue, according to state law.
Byron Henderson, spokesman for the state Department of Revenue, said the state’s residents voluntarily paid $1.3 million in taxes on Internet or other buying that was not taxed at the point of purchase in the fiscal year that ended June 30.
The taxes were paid through returns that the shoppers filed with the department.
“Every year, we undertake a public education effort to make people aware of it,” Henderson said.
Bruce said states are trying two avenues for collecting taxes from Internet and catalog sales.
He said some states, including Louisiana, ask consumers to track their tax-free purchases, tally up the taxes and pay them to state revenue departments.
He said that approach typically generates little money.
Other states, Bruce said, are trying to enforce out-of-state companies’ connections with in-state affiliates, such as a storefront that sells things through Amazon. He said that approach is resulting in mixed success.
State Rep. Rosalind Jones, D-Monroe, attempted to get at taxes through affiliates’ Louisiana addresses by authoring legislation earlier this year that would have expanded the definition of merchants responsible for collecting Louisiana’s sales and use tax. Jones’ House Bill 641 would have included in that definition Internet companies with a physical presence in the state or who work through an independent contractor in the state.
Jindal opposed the legislation, which failed to clear the state Senate.