LANSING – As other states venture into taxation on e-commerce, the bankruptcy and liquidation last month of Ann Arbor-based bookseller Borders may spark the debate in Michigan.
On Monday, U.S. Rep. John Conyers Jr. (D-Detroit) lent his support to the Main Street Fairness Act, legislation introduced in the U.S. House and Senate that would allow states to mandate sales tax collection from companies operating online. Courts have ruled states can only collect sales tax now when a company has a physical presence in that state as well.
“We’re not talking about adding a new tax on Internet commerce; we’re correcting a tax avoidance problem,” said National Conference of State Legislatures President Richard Moore, which backs the federal legislation. “Allowing some remote sellers to avoid this tax is unfair to the main street merchants that make up the lifeblood of our local communities.”
Michigan is one of 18 states being targeted by the Alliance for Main Street Fairness, which bills itself as an organization representing employers who support a “balanced approach concerning the sales tax collection system.”
An Alliance spokesperson did not return a message Monday for comment, but the group previously released a statement regarding the closure of nearly 400 Borders stores across the country.
“Special treatment for Amazon.com is decimating job providers like Borders and countless small businesses across the country. It is simply not fair that one business is able to operate with a government-sanctioned advantage that allows it to undercut its competitors forcing lost jobs and business closures. Lawmakers need to level the playing field and end the special deal that gives Amazon a competitive advantage over Main Street,” said spokesperson Danny Diaz.
While the debate may seem like Amazon versus every brick and mortar shop around, in Michigan the debate could see an interesting twist with Ada-based Amway Global being the 28th largest U.S. online retailer. Amway collects taxes from customers on their online purchases.
Wal-Mart, which has lobbying efforts already set up in Lansing, is a heavy favorite of states mandating that online shops like Amazon be required to pay state sales tax.
Another state targeted by the Alliance saw Republican Texas Governor Rick Perry in July sign a budget bill requiring sales tax collections from online retailers with subsidiaries in the state. Amazon has a distribution center in Texas and actually offered to create 6,000 new full-time jobs if lawmakers exempted them from the budget bill, according to media reports.
According to the NCSL, and based on a University of Tennessee study, states will lose out on $11.3 billion in uncollected sales tax from e-commerce in 2012.
Approximately 104,000 Michigan taxpayers claimed they made catalog, telephone and online purchases and voluntarily paid the state $5.25 million in use tax in 2010, according to figures provided by the Department of Treasury.
Rep. Wayne Schmidt (R-Traverse City) said many people who don’t enter their unpaid tax on their income tax returns aren’t gaming the system.
“It’s more convenience than I think cheating on taxes,” he said.
Schmidt, who chairs the House Commerce Committee, said there has been some talk about addressing the main street issue but he hasn’t seen any draft legislation.
“Having a bricks and mortar retail background, it’s certainly something I’m interested in,” he said. “It’s certainly something, as the governor’s done, making sure taxes are fair and equitable.”
At this point, Schmidt said he’s open to seeing where the discussion goes on the subject, but if legislation gets introduced it could either wind up in his committee or the Tax Policy Committee.
While lawmakers have to mindful of not doing anything to harm Michigan’s economy, Schmidt said, “Now is the time to look at all different options.”
Gongwer News Service attempted to track down where Governor Rick Snyder stands on the issue, but a spokesperson did not respond for comment to this story. The Michigan Retailers Association has been hopeful since last year Snyder said he would be on board.
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