Boards adopt resolution supporting internet taxBy MARLAN JONES,
The Magee and Mendenhall Boards of Aldermen and Simpson County Board of Supervisors recently adopted a resolution showing their support for an in-state tax of customers who buy goods from remote sellers with no physical presence in Mississippi.
In simple terms, the municipalities and county support a tax on goods purchased over the internet. The topic of an internet sales tax or “use tax” has been discussed for a while by Mississippi leadership. Some sites have already been paying a voluntary sales tax to the state for years.
The push to impose a sales tax on goods bought from vendors outside of Mississippi by way of the internet began over two years ago. The law previously read that states and local units of government could not require businesses to collect taxes on sales unless the business had a physical presence within the state. This was enforced after a ruling made by the United States Supreme Court in 1967.
Technology has changed drastically since then. The efficiency and popularity of the internet and online shopping is believed to have made the law somewhat detrimental to the success of local businesses and small towns across the United States. In 2015 due to the astronomical growth of out of state retailers with no physical presence, a number of state legislatures attempted to pass new laws. These laws required remote vendors to collect taxes on sales which will be redistributed by the state. South Dakota was one of the first states to pass such a law, and their law was the first to reach the Supreme Court.
In 2017 House Bill 480 was introduced to the Mississippi Legislature. HB 480 would require Mississippi consumers purchasing from out of state vendors to pay Mississippi sales tax. HB 480 died on July 1, 2017. In 2018, another version of the bill, House Bill 722, died on July 1 of this year. It stated that use taxes collected would be distributed with 70 percent going to the state, 15 percent to municipalities based upon proportion, and 15 percent to the counties for upgrades to infrastructure. It died due in large part to the ruling made by the United States Supreme Court in Quill v. North Dakota.
Mississippi and 41 other states filed a brief with the Supreme supporting South Dakota’s law. It supported the idea that the law gave online retailers an unfair advantage over brick and mortar retailers who must collect state taxes. It also reinforced that the abundance of online shopping was hurting local businesses and communities. A 2012 study estimated that the state loss 23 billion dollars in tax revenue due to online sales.
After a long battle in the court system, South Dakota won. In June of 2018 the United States Supreme Court ruled in favor of South Dakota’s law requiring out of state vendors without a physical presence to collect taxes on sales to customers within the state.
Discussions are edgy, and hard lines are drawn when discussing taxes. From a citizen perspective a new tax law carries with it a negative connotation. Some politicians have spoken out against the internet sales tax citing it as an unnecessary tax being placed on citizens. Booth said, “I don’t understand politicians who voted against it. Citizens are used to paying taxes on goods bought anyway.”
With the recent victory of South Dakota, supporters of the tax in Mississippi have been reinvigorated. The previous two attempts to pass the bill have been shot down due to the standing legal precedents. Thanks to South Dakota’s victory new legislation is not needed to collect taxes on internet sales, but now a decision must be made on how the money is dispersed. The Mississippi Municipal League and other organizations are now calling for a special session.
Mendenhall Mayor Todd Booth said that this has been a hot issue at MML conferences. He said, “Small towns and businesses depend on that sales tax to improve the city infrastructure.” He said the push for the sales tax is to get the money back into the hands of the municipalities for infrastructure use. He said, “There are no kinds of grants available to help with streets. You may get lucky and get one to help with your sewer every now and then, but that’s it. If passed that’s what the money will be used for.” Booth said he hoped that a special session is called to address the issue.
Booth is firm in his belief that the new tax will be beneficial to the town if passes. It will assist with the budget and allow for growth and prosperity among local business owners. Booth said, “It’s not fair to the other shops and merchants in town. Make the playing field for business owners equal.”
The current proposal is that the goods sold by remote retailers be taxed and that no less than 18.5 percent of the tax revenue collected be diverted to the municipalities.
Magee Mayor Dale Berry said, “The internet was killing municipalities because cities depend on that tax money, and we don’t get anything from that.” Berry said that Senator Chris Caughman has sponsored a bill for the last two years that would send 20.5 percent of sales tax back to municipalities.
District 90 Rep. Noah Sanford explained that the legislature now has to determine what will be done. Under the current law, which Sanford said is “not wise,” municipalities get 18.5 percent of the sales tax and counties get none.
Sanford explained that in the recent session the Senate demanded that any funds returned to municipalities and counties be matched. The House of Representatives refuted this proposal, stating that smaller municipalities such as D’Lo or Braxton would never be able to match the returns. Both sides refused to move and nothing was accomplished.
The two sides have come to somewhat of an agreement, according to Sanford. He said that the new proposal would require counties to match the returns, but not municipalities. There may also be a provision in the new proposal stating that the money must be used for infrastructure and transportation.
Rumors of a special session are gaining traction. Sanford said that the session could begin as early as August 23, but no official call has been made.
Along with the use tax, it is anticipated that the session will cover sports betting and a state lottery as well.