In the name of tax fairness
One of the longest-standing and most egregious tax inequities, adversely affecting every state and every local government, finally might fall due to a bill in the U.S. Senate. If it passes, Pennsylvania alone could realize more than $700 million a year in uncollected tax revenue.
The aptly named Marketplace Fairness Act received overwhelming bipartisan support in a procedural vote Tuesday, 74-20, setting up a final vote sometime soon.
Under the legislation, online retailers would be required to collect and remit sales taxes to states as if they were conventional retailers with physical stores. Now, online sellers are required to remit sales taxes only if they have a physical presence - a warehouse or office, for example - in the state where the sale is made.
That puts conventional retailers at an enormous disadvantage. Those retailers own or rent property, hire local people, pay local taxes and otherwise contribute to the economic and civic lives of local communities. Then, they are rewarded by the inherent disadvantage of online retailers underselling them with the help of direct or de facto sales tax exemptions.
According to the National Conference of State Legislatures, the online sales tax evasion amounts to about $23 billion a year, more than $706 million a year in Pennsylvania alone.
Pennsylvania's government is aware of the problem. But it has tried to remedy it by requiring consumers to pay the tax directly to the state long after the sale. Taxpayers are supposed to report their online purchases and pay the sales tax when they file their state personal income tax form. Few do so, however, with good reason. The filing deadline is April 15, and includes sales that might have been made as long ago as January of the preceding year. As a practical matter, the only way to collect sales taxes is at the point of sale.
The same technology that enables online sales is readily available to facilitate collection and distribution of the sales taxes.
The bill has strong support in the Senate and President Obama's backing. State government leaders should press the state's House delegation to ensure passage in the name of tax fairness.