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Report: Missouri loses $468M in online sales tax

Wednesday, January 2, 2013 | 4:05 p.m. CST

KANSAS CITY — Missouri loses about $468 million per year in uncollected sales tax on purchases made over the Internet, according to researchers at MU's Truman School of Public Affairs.

The state misses the money in part because it hasn't signed onto a 1999 agreement to simplify and encourage voluntary collection of sales taxes by e-commerce retailers, The Kansas City Star reported. Only about half of the states have signed the agreement.

The U.S. Supreme Court has ruled that states cannot levy sales and use taxes on businesses that don't have a store, office or other physical location in the state. Missouri consumers are technically required to pay taxes on purchases from outside the state, but almost none comply.

To remedy that situation, the National Governors Association and the National Conference of State Legislatures created the Streamlined Sales and Use Tax, which is meant to simplify sales tax collection across jurisdictions that have varying tax rates. The governing body for the Streamlined Sales agreement says about 1,400 retailers voluntarily collect sales taxes under the agreement.

Participating in the program would provide a short-term solution, increasing revenue for Missouri, MU researchers said in its report. The better, longer-term solution, the report suggested, is for Missouri legislators to lobby Congress to pass federal legislation.

A Marketplace Fairness Act, introduced in Congress and co-sponsored by Sen. Roy Blunt, a Missouri Republican, and Sen. Richard Durbin, an Illinois Democrat, would give states additional power to collect sales tax on e-commerce.

"The act would bring equity to sellers and consumers in the sense that it would be harder for individuals to evade paying sales and use taxes," the MU report said.

The report said the act also would "level the playing field" for Missouri-based sellers forced to compete with online vendors from outside the state.


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Comments

John Schultz January 3, 2013 | 2:28 p.m.

A question that has vexed me for sometime is how the states can join groups to collect sales taxes or the federal government implement a system to collect interstate sales taxes when the Supreme Court has decided such taxes may not be collected. I have yet to see a rational explanation for the state and federal actions.

(Report Comment)
Jack Hamm January 3, 2013 | 3:50 p.m.

John,

My understanding of the case law is that the Supreme Court ruling (Quill v. North Dakota) stopped States from collecting interstate tax if there was no physical presence but ruled that on the Federal level it is not unconstitutional and left it for congress to address (which to no surprise they have not).
From their decision:

"This aspect of our decision is made easier by the fact that the underlying issue is not only one that Congress may be better qualified to resolve, but also one that Congress has the ultimate power to resolve. No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions …. Indeed, in recent years Congress has considered legislation that would “overrule” the Bellas Hess rule. Its decision not to take action in this direction may, of course, have been dictated by respect for our holding in Bellas Hess that the Due Process Clause prohibits States from imposing such taxes, but today we have put that problem to rest. Accordingly, Congress is now free to decide whether, when, and to what extent the States may burden interstate mail order concerns with a duty to collect use taxes.”

(Report Comment)

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