Briefing: Online Tax
Forget New Hampshire. According to many Massachusetts retailers, the biggest tax-free shopping threat may come from the Internet. A movement is afoot to force online retailers to collect sales tax when they sell to state residents.
Who’s pushing for the change?
The Massachusetts Main Street Fairness Coalition was formed by the Retailers Association of Massachusetts specifically to advocate for equal taxes on online sellers. A national group called Alliance for Main Street Fairness, with backers including Wal-Mart Stores Inc., Target Corp. and other big chains, is pushing for online taxes in multiple states.
Are they getting anywhere in Massachusetts?
Two bills supporting the changes that the Coalition is advocating for have been introduced, one by Sen. Steven Tolman, D-Brighton, and Rep. Martin Walsh, D-Dorchester, and another by Rep. Jay Kaufman, D-Lexington.
Aren’t state residents already required to pay taxes on out-of-state purchases?
Yes. They are supposed to report purchases on their state income taxes, but few do, and the state doesn’t usually enforce the requirement.
What effect does the failure to collect the sales tax have on the state budget?
If the Massachusetts 6.25 percent sales tax were applied to internet, catalog and telephone business, the state would collect up to an extra $189.1 million this year, Department of Revenue spokesman Bob Bliss told the Globe.
What’s happening in other states?
Illinois recently passed a similar law, and, according to The Wall Street Journal, Hawaii, North Carolina, New York and Rhode Island have done the same. Other states including California are considering the idea.
Are online retailers fighting back?
Yes. The Supreme Court has ruled that online merchants can only be forced to collect sales taxes if they have a physical presence in that state. The new and proposed state laws attempt to expand the definition of physical presence to include any local businesses that an online seller uses as marketing affiliates. In Illinois, Amazon closed down its marketing affiliates program after the new law passed.
Related links
The Massachusetts Main Street Fairness Coalition
WBJ Web Partners
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