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Mass. Treasurer Calls on U.S. Senate Finance Chair to Approve Online Sales Tax

Massachusetts Treasurer Steven Grossman cites fairness to brick and mortar businesses, as well as an additional $387 million in sales tax collected, as reasons to implement a state sales tax on online purchases.

Just in time for Black Friday and Cyber Monday, Massachusetts Treasurer Steven Grossman is asking the U.S. Senate's Committee on Finance to support legislation allowing states to tax sales made online.

"This is fundamentally an issue of Main Street fairness - brick and mortar stores that create and support local jobs should not be at a competitive disadvantage against out-of-state online sales giants," Grossman said in a press release Tuesday. "It’s time to level the playing field by creating a consistent sales tax policy."

Grossman sent a letter to U.S. Senator Max Baucus, Chairman of the Senate Committee on Finance, urging him to support legislative efforts to allow states to implement uniform Internet sales tax laws.

According to the release, online retailers only have to charge sales tax to a buyer if they have a physical presence in the buyer's state.

This provision results in many online purchases not being assessed the Commonwealth’s 6.25 percent sales tax, creating a disincentive for residents to shop at local businesses that support jobs and the Massachusetts economy. Further, large internet sellers that have built and invested in retail stores in Massachusetts, such as Apple and Staples, are required to charge sales tax for online sales, while their competitors with no Massachusetts investment are not.  Presently, there are more than 500,000 retail jobs in Massachusetts.

Grossman pointed to bipartisan legislation authored by Senators Mike Enzi and Richard Durbin as an example of a fix at the federal level.  While Massachusetts officials have entered into negotiations with Amazon.com to discuss charging an online sales tax, a federal law is generally viewed as the most effective way to compel all online retailers without a physical presence in a state to charge that state’s sales tax.  

A recent independent study has concluded that, in addition to creating a level playing field for local businesses, Massachusetts could have collected $387 million in additional sales tax revenue in 2011 if it had the ability to tax Internet and other remote sellers. That amount is expected to more than double to $783 million by 2020.

In the letter, Grossman argues that this request is "a matter of fairness and equity to Main Street businesses....Local retailers and other merchants should not have to compete with online sales giants that do not have to collect state and local sales taxes.

It is simply contrary to sound public policy to penalize companies that actually invest in a brick-and-mortar presence in a community. There are more than 500,000 retail jobs in the Commonwealth of Massachusetts, and they are threatened by this lack of a level playing field. It also is unfair, for that matter, to large Internet sellers such as Staples or Apple, who invested in retail stores in Massachusetts and thus must charge sales taxes while their competitors don't.

Should online sales be taxed by the state? Share your opinion in the comments box below.

malcolm nichols November 26, 2012 at 11:50 AM
If you go to a store in NYC and buy something who collects sales tax? When you buy a product on line from a store in NYC (under this new regulation) who collects sales tax?

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