Collecting tax for online purchases is complicated -- Supreme Court ruling leaves states to jump through hurdles

JACKSON - The next time you're talking with candidates for theLegislature, ask if they think everyone should pay their fair shareof sales taxes.

Then, ask if that applies to folks in Mississippi who buy online.

Then, ask why the Legislature hasn't done anything.

If they know - and that's a big if - they likely can't explain itin laymen's terms.

Just know that implementing an online sales tax requires statesto jump more hurdles than you'd find in an average steeplechase.

Or, as Mississippi Department of Revenue spokeswoman KathyWaterbury, who gets asked about it a lot, says: "The answer to thequestion is not a simple one; the response usually creates morequestions."

"I'm afraid too many believe that there is an easy fix tocollecting online sales tax," she said.

States want residents to pay sales taxes on all the things theybuy. Online shoppers, this means you.

States are looking at various means to address the issue,especially in light of tight budgets and without violating a 1992U.S. Supreme Court ruling that prohibits a state from forcingbusinesses to collect sales taxes unless the business has a physicalpresence, such as a store, in that state.

States are trying to get around that restriction by enacting lawsthat broaden the definition of a physical presence. Retailers areresisting becoming tax collectors.

The Supreme Court ruling has meant that Wal-Mart Stores Inc.,based in Bentonville, Ark., would collect taxes from shoppers in allstates with sales taxes, whether those shoppers buy items on or offthe Web, because it has stores nationwide.

But Amazon, for example, based in Seattle, wouldn't collect taxesfrom Mississippi residents because it doesn't have a presence here.

Some states are now saying a retailer has a physical presencewhen it uses affiliates - people and businesses that refer customersto the retailer's website and collect a commission on sales.

These affiliates range from one-person blogs promoting the latestgadgets to companies that run coupon and deal sites.

Illinois passed a law requiring Internet companies withaffiliates in that state to collect taxes on sales to Illinoiscustomers. New York, North Carolina and Rhode Island have alreadyadopted similar laws.

In Colorado, a law requires online retailers to either collectthe tax or send customers an annual notice letting them know howmuch they owe their state. Retailers would also have to report thatto Colorado officials.

Here, in a recent editorial, The Mississippi Press in Pascagoulasaid collecting the sales tax would create more money for publicservices. The editorial noted that online retailers oppose such lawsbecause they use their tax-free status as a marketing tool.

"It's unfair to local retailers, who must collect sales taxesfrom customers. These businesses support state and local serviceswith their tax collections, and they deserve to be on a levelplaying field with Internet retailers," the editorial said.

Waterbury said about 1,600 online sellers voluntarily collectMississippi sales tax, which brought in about $36 million in fiscalyear 2010.

Congress could give states authority to require tax collection byout-of-state retailers. Efforts have stalled because, some say,Congress is being asked to pass legislation where they could becriticized as imposing a new tax.

A group of states also came up with the Streamlined Sales TaxAgreement, an attempt to create some levels of uniformity to easethe burden for national online merchants to collect the sales taxes.

Waterbury said adopting the SSTA requires states to rewrite thesales tax laws. Waterbury said Mississippi would not pick and choosespecific parts of the agreement to apply. She said the requirementfor a uniform set of definitions and rules is all or nothing.

Waterbury said the Legislature would have to look at all taxrates, exemptions and exclusions. She said that could mean sometaxpayers could pay more; others, less.

She said some cities, which get back every year a portion of thesales tax, could receive less money; others, more.