How to make web-based commerce equal to other transactions is a conundrum that evades solution in many industries. Book stores – paying property taxes and what-not – go out of business while Internet giants like Amazon.com prosper. Online publications aren’t the only businesses who have yet to crack the code for making the service equal to what subscribers pay. Now Congress seems to be warming to the question: How to collect sales tax on Internet purchases? Mostly states stand to benefit but there’s a federal angle to any taxes hopeful enough to quicken the heart of most politicians.
Washington state beat Congress to its newfound awareness. Our neighbor to the south figures collecting sales tax could generate about $284 million in 2013-15, and $845 million in 2015-17, according to the Seattle Times. Washington currently struggles with revenue shortfall of $1.2 billion that means more budget cuts again this year. The fault for the revenue shortfall is laid at the door step of Medicaid, as it is for many small and large states alike.
Nothing like necessity forcing the wheels of progress.
Collecting sales tax from its online industries will fill revenue gaps in Washington.
As part of the ongoing budget debate, a supermajority of 75 U.S. senators endorsed the Marketplace Fairness Act or S 336. It was not a binding vote, but suggested a decade-long battle over online sales taxes is nearing an end. The act, pending in the U.S. House and Senate, streamlines collection by requiring states to sign onto a multi-state agreement.
Sen. Mark Begich supports the Marketplace Fairness Act, which would allow, but not require, states that have sales taxes to collect them for online sales. This bill is designed to level the playing field for brick and mortar businesses, he said. Because Alaska does not have a sales tax, Alaska business under the $1 million exemption will not have to change their current practices. Alaska businesses over the $1 million exemption will need to change their practices when making online, out-of-state sales to states with sales taxes. But overall, there will be minimal impact on Alaskans who buy or sell online, he said.
Here’s how it works in Washington state. Businesses are to collect sales tax under these conditions:
If the goods are located in Washington at the time of sale and the goods are received by the customer or its agent in this state.
If the seller has a branch office, local outlet, or other place of business in this state which is utilized in any way, such as in receiving the order, franchise or credit investigation, or distribution of the goods.
If the order for the goods is solicited in this state by an agent or other representative of the seller.
If the delivery of the goods is made by a local outlet or from a local stock of goods of the seller in this state.
If the out-of-state seller, either directly or by an agent or other representative in this state, installs its products in this state as a condition of the sale.
The Marketplace Fairness Act takes into account that many states do not have a uniform sales tax. Alaska is one where taxes on the Kenai Peninsula might range from 3 to 7.5 percent, while Anchorage collects no sales tax.
The concept may need more work to smooth out legislative wrinkles, but it’s worth a vigorous debate. It’s only fair.
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