Editorial: What's Fair?
Who doesn't love shopping on the Internet? It's convenient, it's fast, it's unlimited.
With the click of a button you can order an out-of-print book from your childhood and have it on your doorstep the very next day.
But part of the reason why online shopping is so great is that it’s cheap. And it’s especially cheap because online retailers don’t have to charge us sales tax, which in Massachusetts is 6.25 percent. Technically, we’re all responsible for itemizing our online purchases at the end of each year and coming clean with our state Department of Revenue. But most of us don’t. In fact, the state estimates that its sales tax loss from online purchases is in the neighborhood of $148 to $189 million.
Of course we, the residents of Massachusetts would be paying that those millions, not the online retailer.
But online retailers like Amazon.com and others are fighting efforts in several states to require Internet sellers to start collecting sales taxes.
Competitive Edge
One proposal in Massachusetts that matches enacted legislation in a handful of other states would seek to close the so-called loophole for online retailers and require any dot-com that has affiliates in the state to collect the 6.25-percent tax. The affiliates would include anyone based in Massachusetts that runs advertising for a company like Amazon, or a blogger that sends readers to an Amazon product page.
Amazon has told its affiliates in Illinois, which passed a similar law, that it would sever ties and stop paying them commissions. That doesn’t end up hurting Illinois customers. They can still buy from Amazon, but it does take money out of the pockets of those affiliates.
The affiliate proposal, which penalizes the marketers, doesn’t seem to meet the fairness test. It has the potential to reduce jobs, while bringing in little added revenue for our state.
Thankfully, there is another way — a federal solution called the Streamlined Sales Tax Agreement, which has been adopted by 24 states. The agreement aims to simplify sales taxes and encourage online retailers to collect them. The hope is that once enough states have endorsed the agreement, Congress will get the push it needs to take action and mandate some federal solution that levels the sales-tax playing field for main street and Internet retailers.
We need to do everything we can to preserve our local economies. That begins with making the effort to buy local whenever possible. It also includes developing a way where all retailers, regardless of whether they sell via an online portal or a brick and mortar store, collect sales taxes. It’s tempting to go with a state solution on this issue, but in the end, a hodgepodge of rules throughout the 50 states will do little to help state coffers. A federal effort is needed to bring some common sense to this debate.
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