Views from Kansas: Right decision on online tax
Editor’s Note: Views from Kansas is a regular feature that highlights editorials and other viewpoints from across the state.
While the U.S. Supreme Court might not have clothed itself in glory as it closed out its term this year — upholding President Trump’s ban on travelers from majority-Muslim countries, among other dubious decisions — it did open one door that holds potential for Kansas.
In a 5-4 vote, the court has formally allowed states to collect sales tax on purchases made online. Previously, if a business didn’t have a physical presence in a state, it wasn’t required to collect the tax. (Taxpayers might have been required to do so, but when was the last time you did so?)
Now-retiring Justice Anthony Kennedy wrote in the majority opinion: “Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States.”
He added that such a barrier “limited States’ ability to seek long-term prosperity and has prevented market participants from competing on an even playing field.”
Kansas legislators heard testimony on collecting the tax last session, but the case before the high court was undecided at that point. It was estimated, however, that the state could have gained somewhere between $113 million and $170 million from such taxes last year.
These numbers matter, especially given the decisions that lawmakers will face next session.
They will be under pressure from the state Supreme Court to adequately fund schools. The court has suggested that the state needs to adjust payments to account for inflation. An extra $100 million plus each year could go a long way toward meeting that requirement.
Pressure has also increased from all corners to reduce the state’s sales tax on food, which stands at 6.5 percent in addition to any local taxes. Revenue from online purchases could also help reduce that shamefully high percentage.
At this point, state legislators owe it to their constituents to make sure that online businesses collect the same sales taxes as brick-and-mortar ones. Beyond the additional revenue mentioned above, such tax equity will benefit local businesses. Until now, they faced would-be customers who would make tax-free online sales after browsing their real-world wares.
Online sales taxes won’t solve everything, of course.
Most large online retailers (such as Amazon) have been collecting them for some time. The burden will largely fall to smaller online companies and individuals hawking their wares in virtual marketplaces. And the challenges facing real-world retail aren’t simply about cost.
But the U.S. Supreme Court has cleared a path for our state lawmakers to follow, one that will help Kansas on the road to recovery after damage wrought by former Gov. Sam Brownback’s misguided tax policy.
We should take that path.
— Originally published in The Kansas City Star