Let’s say you have operated a small widget company on Main Street for many years.
Then a large national company comes to town selling the same line of widgets for 5 to 10 percent less.
Why? Not because they are more efficient or have a better product, but because they have a special arrangement with the federal government.
Not fair, you would shout. And shout. And shout.
Right up until you post the “going out of business” sign in your window.
We have been shouting on behalf of local merchants for years about just such a sweetheart deal online retailers have enjoyed for more than a decade.
It’s the failure to impose state sales taxes on online purchases.
It’s unfair and it’s a job killer on main streets across the country. What’s more, it cheats state and local governments out of millions of dollars in uncollected revenue.
Now there is a bill in Congress to correct the problem, which costs state government in Maine about $65 million per year.
Gov. Paul LePage recently said he would ask the state Legislature to find $100 million in cuts during the next legislative session.
What a head start it would be for the state to simply begin collecting $65 million it is legally entitled to receive but goes unreported by Mainers making online purchases.
State law requires Maine residents to keep track of retail purchases made online and, when sales tax is not assessed, to pay it on their annual income tax forms.
Clearly, not all of us do.
This unfair system was created in 1992 when the U.S. Supreme Court ruled that sales taxes varied so much by state and community that it would impose an unfair burden on online retailers to collect it.
But the court decision also left open the possibility that such a tax could be imposed by Congress.
Companion bills now have been introduced in the U.S. House and Senate to force collection of sales taxes by online retailers.
Sophisticated mapping software now makes it much easier for retailers to calculate and apply state and even local sales taxes.
Unfortunately, both bills have been submitted by Democrats, which is an almost certain sign that this is already a partisan issue. Most congressional Republicans have signed a pledge that they will never raise any tax ever again.
However, this is not about a new tax or even a tax increase. It is about government failing to collect a tax that is already on the books.
For years it was argued that online retailing was new and deserved a break to get off the ground.
That was then, but the argument clearly cannot be made today. Online retailing is a $250 billion business, and each year local and state governments are cheated out of $11.4 billion in lost tax revenue.
This tax is owed, and this tax should be paid. It’s as simple as that, and it would be a shame if partisan bickering prevented Congress from finally doing the right thing.
Sadly, we have seen enough of that already.
rrhoades@sunjournal.com
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