Herald-Leader Editorial

Collect taxes from online sales

fair to other businesses that do and funds will aid state finances

May 19, 2013 

It seems like the biggest argument against the proposed Marketplace Fairness bill is that it would just be too much trouble.

Too much trouble for online retailers to collect and remit taxes to multiple jurisdictions.

Too much trouble for congressmen who are afraid of appearing pro-tax to explain why it's not a new tax.

That didn't stop the Senate, which passed it with a bipartisan 69-27 vote. Rand Paul and Mitch McConnell were in the minority.

A bit of explanation and history. For decades retailers have collected sales taxes, which they pass on to the government. For many Internet purchases the online retailer doesn't collect taxes.

Instead, the buyer is supposed to calculate the appropriate taxes on his purchases and pay them. Of course, virtually no one actually does that; most people aren't even aware they are supposed to.

In the early years of the Internet this issue languished, both because of the complexity of sorting out how to collect taxes on remote sales, and an interest in allowing this great new economic engine to grow.

Well, it's grown. With the technological sophistication of web retailers who track our every click, the complexity issue has diminished.

Additionally, the bill requires states to provide retailers with software to calculate sales taxes, prepare returns and provide updates.

In politics, words often mislead but this bill is truly about fairness.

Fairness to the brick-and-mortar retailers who suffer because it's cheaper to buy things tax free online.

Fairness to local governments that lose revenue when consumers buy things online and not in a store.

As it happens, Kentucky does pretty well because online retailers do collect taxes where they have a physical presence. Online goliath Amazon, with distribution facilities here, does collect and remit Kentucky sales taxes.

McConnell, tacking hard to the right as he faces an election, said he voted against the measure because he was looking out for the "little guys." Our senior senator has been called many things in his long years in Washington but rarely the champion of the little guy.

That said, only online retailers with more than $1 million in annual sales would have to collect the tax. And, of course, there are plenty of "little guys" selling from physical stores who are hurt by the current inequity.

The bill also requires that only one entity in each state could audit retailers, collect taxes and provide information on what products are taxed, undercutting the opposition's doomsday image of beleagured retailers struggling with thousands of different tax collectors.

Paul called it "nothing more than a huge tax increase," and Rep. Thomas Massie, R-Vanceburg, calls it a "tax mandate," even though the bill has nothing to do with raising, or lowering, taxes, just collecting them. Massie's over-the-top rhetoric against the measure includes charging that it "changes the very constitutional fabric of the United States."

Rep. Andy Barr, R-Lexington, says he's heard from lots of brick-and-mortar retailers who suppot the measure and acknowledges that it's only about collecting taxes not levying them, but won't take a position on the bill.

With the exception of John Yarmuth, D-Louisville, who supports the measure — other members of Kentucky's delegation, like Barr, seem to hope it won't reach the House floor for a vote,

That would be a shame. Because this bill is about leveling the playing field for retailers who provide services, employ people and pay payroll and real estate taxes in our communities.

And, to the extent that it's about taxes, it would help avoid raising or creating them by collecting those we already have on the books.

Kentucky's congressmen should push for a vote on this bill, and then vote for it.

Lexington Herald-Leader is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service