MuskogeePhoenix.com, Muskogee, OK

April 28, 2013

Bill to allow tax on online sales finds supporters

Cities, retailers push legislation; Congress listens

By D.E. Smoot
Phoenix Staff Writer

— Legislation that would allow states to compel online retailers to collect and remit sales taxes appears to be gaining traction in Congress.

The measure has widespread support from Oklahoma municipalities that depend on sales tax collections to provide government services. Brick-and-mortar retailers who have to compete with online retailers see the legislation as a way to level the playing field.

At present, sales taxes can be collected only from online retailers that have a physical presence in the state where the Internet sale originates. As a result, consumers can avoid paying sales taxes for online purchases, which puts local retailers at a disadvantage.

The National Conference of State Legislatures estimates that states lost $23 billion in 2012 because of the inability to collect taxes on out-of-state sales made online. Municipalities experienced similar losses.

The Senate is expected to vote early next month on a bill that would authorize states to compel sales tax collections and remissions from online retailers. Senators voted 63-30 on Thursday to end debate on the bill but delayed a final vote on passage until May 6, when they return from a weeklong vacation.

Oklahoma Sens. Tom Coburn and Jim Inhofe voted against closing the debate. A spokesman for Inhofe’s office said the state’s senior senator would comment only after the final vote.

Aaron Fobes, a spokesman for Coburn’s office, said the Muskogee physician favors “comprehensive tax reform, not a standalone bill with Internet taxes that has not been carefully reviewed.”

Although observers believe senators will approve the measure, a similar bill in the House of Representatives may receive stiffer opposition. Some House members see the move as a new tax.

U.S. Rep. Markwayne Mullin of Oklahoma’s 2nd Congressional District sees it differently. Mullin said officials from a number of municipalities have spoken with him about the issue.

“This is not a new tax, so no tax increase will result as opponents have stated,” Mullin said in an email response to inquiries from the Phoenix. “It is my hope we are able to have an open debate on such legislation and concerns from all sides can be addressed.”

Mullin said the House legislation, which has yet to have a hearing, “would deal with the problem our state currently has with collecting the lost revenue on purchases made online by consumers in Oklahoma.” Basically, that involves the sales tax not being collected and remitted by online-only retailers.

“Local brick-and-mortar businesses in our communities remain frustrated that they are losing money to online retailers,” he said. “In turn, (they) are losing tax revenues for local communities that are facing tough fiscal situations.”

Muskogee City Manager Greg Buckley lauded Mullin’s position. He said the passage of the bills and presidential approval “would be very positive for Muskogee.”

“I think it would be very positive for Muskogee and the nation to be able to identify all retail sales and put all retailers on a level playing field,” he said. “This is about the collection of a sales tax, not whether they are owed or not owed.”

Buckley said local retailers face stiff competition from online counterparts because there is a perception that online businesses have lower prices. He said he believes that consumers see only the discount because of the absence of a sales tax but don’t take into consideration the extra cost of shipping.

“There is a need to collect that tax in order to provide the services residents expect us to provide,” Buckley said. “The ability to collect those taxes (from online sales) will help us improve our streets, provide better police and fire protection, and better serve our citizens.”

Reach D.E. Smoot at (918) 684-2901 or dsmoot@muskogeephoenix.com.