The issue of internet retail businesses collecting state sales tax has become a bone of contention for local and state governments during the past five years, but the U.S. Supreme Court has agreed to hear the issue again in, possibly in April.
In several previous Supreme Court rulings, however, the justices ruled a state can’t collect sales tax from a retailer who doesn’t have a physical presence in that state. In a brief filed with the court, 36 states and the District of Columbia wrote, “As the volume of internet-based retail transactions continues to compound daily, the physical-presence rule exacts an ever-increasing toll on the States’ fiscal health.”
According to one estimate, the states said they’ll lose $211 billion in tax revenue over the next five years. One report says $84 billion this year. Amazon.com and Walmart.com, for example, do collect sales taxes in the states they conduct business including Nevada. Many firms not having a physical presence do not collect sales tax but consumers are required to pay the sales tax, which they don’t.
State governments including Nevada have been losing millions — if not billions — of dollars from the internet sales, in which many businesses lower prices and do not assess tax. For the merchants in Nevada and other states, this revenue loss is tremendous.
Nevada, for example, assesses a sales tax as do 44 other states and the District of Columbia. States should be allowed to collect their fair share in a competitive marketplace.
The latest brief filed with the court comes from South Dakota. Two years ago, South Dakota, like Nevada which does not have a state income tax, passed a law requiring out-of-state sellers to collect and submit sale tax to the state. The state’s highest court, though, struck down the law and referred to previous cases handled by the Supreme Court.
Retired Churchill County Comptroller Alan Kalt said it’s only fair that states collect sales tax from internet sales. During a five-year period, he saw a portion of the county’s monthly and annual taxable sales take a 3-5 percent hit because of online shopping. Not only does the county experience a loss but so do local merchants when shoppers go online and do business with out-of-state retailers.
By assessing a 5 percent penalty on taxable sales due to online shopping, Churchill County has lost millions of dollars through since the fiscal year began in July, and Nevada has lost at least $1 billion in sales tax based on previous reports. With state numbers like these, the Nevada Legislature would not have to scour the state looking for additional taxes to fund programs if internet retailers paid sales tax.
We are hopeful the Supreme Court will change direction and see how the lack of collecting sales tax hurts states, many of them that are Red States governed by Republican governors and/or legislatures. Taxing all internet sales gives state and local municipalities their rightful share of money that should also be sent to them in a competitive environment and also gives both the local and state business owners a chance to compete in a worldwide market.
LVN editorials appear on Wednesdays.