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Businesses Await Internet Sales Tax
LANSING — Michigan shoppers are one step closer to paying sales taxes on items they buy and sell online and through the mail.
Gov. John Engler has signed a bill standardizing the collection of sales taxes on Internet and catalog purchases. It's now up to Congress to allow states to collect that tax, but it may takes years before Michigan sees any revenue.
Larry Meyer, Michigan Retailers Association's chief executive officer said, "This is a critical step toward providing fairness for Main Street retailers and greater convenience for consumers."
Lawmakers who fear the tax hike label emphasize that this is not a new tax on consumers, but an old one that isn't always paid. Under current law, consumers are liable for the 6-percent tax on any purchases made online or through the mail. The payments are to be included with their state income tax returns.
"A lot of people don't know about it and a lot don't pay it," said Tom Scott, vice president of communications and public affairs for the Michigan Retailers Association. "People are supposed to keep track of it and file it. This makes it much easier if retailers do it for them."
Michigan is now one of 20 states that have joined in the streamlined sales and use tax agreement. The governor's deputy press secretary, Matt Resch, said Congress should give states the right to collect the tax now that 20 states are signed on.
Some local businesses have been hurt by the increase in mail order shopping and e-commerce. In recent years, they've seen a drop in profits with customers turning to the Internet or catalogs to do their shopping, usually without paying sales taxes, according to proponents of the legislation.
According to Scott, "Retail is so competitive and profit margins are slim; a 6-percent disadvantage definitely hurts."
The products hit hardest by online and mail order shopping are usually big-ticket items like furniture, computers and sporting goods, where consumers save a substantial amount by not paying the sales tax.
At the same time, Scott sees businesses increasingly turning to the Internet to bring in customers. "A lot of businesses, both large and small, are going online to take advantage of more marketing opportunities and to provide additional services to customers."
However, the main goal of enforcing the sales tax collection is to help ease the state's budget crunch by increasing tax revenue. The nonpartisan House Fiscal Agency estimates that for 2000-01, the state will miss out on about $200 million in revenue from Internet and catalog sales. More than 70 percent of this money would have gone toward school funding.
"It's important in order to capture lost school revenues generated by the sales tax, and it's a matter of equity for the competitive position of our brick-and-mortar retailers," said Barry Cargill, vice president of governmental relations for the Small Business Association of Michigan.