Perhaps this will be the last Christmas shopping season where mom-and-pop retailers are punished by unfair sales tax laws.
While much of the country on Cyber Monday was busy buying gifts through online retailers like Amazon, eBay and Overstock, the U.S. Supreme Court delivered a key piece of news for traditional retailers. The court declined to hear a case that sought to overturn a New York law that allows the state to charge sales tax on most online purchases made in the state.
As the Washington Post reported, the court’s decision to allow the law to stand “could end tax-free online shopping for many Americans,” It went on to characterize the issue as “one of the most important in modern retailing.”
The decision also should spark an immediate examination by Kansas lawmakers on how the state can begin charging sales tax for online purchases. The sales tax inequity that exists between traditional brick-and-mortar businesses and online retailers has made life more difficult than it needs to be for many independent retailers who play vital roles in many communities.
It is possible Congress may try to address the issue by passing a law that would require any online retailer that has more than $1 million in sales outside their home states to charge sales tax on all their sales. The bill — the Marketplace Fairness Act of 2013 — has been approved by the Senate, but is facing opposition in the House. Some conservatives in the House, reportedly, are balking at the plan because they believe it would represent a tax increase.
That’s faulty logic. Online shoppers in Kansas, for example, already are required to pay a “use tax” that is equal to a sales tax on their purchases. But the tax is difficult for the state to collect because online retailers aren’t required to collect it at the time of sale. The only reason sales taxes get paid in brick-and-mortar establishments is because shoppers aren’t allowed to leave the store with their purchase until the sales tax is paid. That’s the way it should work in the online world too: A purchase doesn’t ship until the tax is paid.
Federal legislation that would create a level playing field across the country likely would be the best path forward. But waiting on Washington to fix problems has not been very productive of late, so Kansas officials should begin their own research into how a state law could be introduced during the upcoming legislative session.
For years, state officials have complained their hands have been tied by federal laws related to Internet sales taxes. The Supreme Court has greatly loosened those restraints. Now it is time for state officials to demonstrate they do truly care about the plight of small retailers who are seeking nothing more than a level playing field.