The Mississippi House debated this week whether to force companies without a physical presence in the state to collect Mississippi sales taxes on internet purchases. One of the often repeated talking points by supporters of collecting the tax has been that the tax is currently due to the state from the consumer and, as Rep. Trey Lamar argued, failure to pay the tax is criminal tax evasion.
However, at issue is also whether or not forcing companies who do not have a “brick and mortar” location within state borders to collect the tax on behalf of the Mississippi Dept. Of Revenue is a form of taxation without representation. Currently the tax is due from the Mississippi consumer, but the state Dept. Of Revenue has no enforcement mechanism in place to force collect from purchasers.
The Dept. Of Revenue filed notice with the Secretary of State’s office in mid-January of a proposed change to administrative rules that will allow the agency to collect the tax regardless of the outcome of the legislation currently being considered by lawmakers, suggesting officials recognized weeks ago the uphill battle they were going to face in the legislature.
But if the agency regulatory change does take effect through the proposed administrative rule, and if lawmakers continue to reject passage of the house bill into law, then the stage is set to challenge if the rule change by DOR can carry the force of law (see the proposed change below).
PROPOSED CHANGE TO DEPT. OF REVENUE AGENCY RULES:
DOR Commissioner Herb Frierson announced several days ago that online retail giant Amazon agreed to voluntarily begin collecting the 7-percent sales tax. Amazon has used this tactic in tax jurisdictions across the country as a way to gobble up a larger portion of the market, but also because Amazon has developed and sells a version of the sales tax software that online companies need to decipher an order and determine which combination of taxes apply. There are nearly 9,000 different state, local and municipal tax jurisdictions across the country.
The U.S. Supreme Court has ruled that states cannot force out of state companies to pay the sales tax. But many states are passing similar internet sales tax laws anyway in an attempt to get the court to revisit the decision and clarify the constitutional parameters of the earlier ruling.
At a time when state revenue projections have repeatedly fallen short and forced Governor Phil Bryant to cut spending through emergency budget cuts, state officials are digging to find new money to help slow the bleeding. New reports indicate that the governor may be forced to make another round of cuts soon.
Opposition to the tax has remained clear that forcing the collection, whether one considers those not paying it as criminally evading the law or not, is ultimately about taking more money from Mississippians and handing it over to a state government that has proven to be neither transparent with taxpayers regarding the details of how the money is being spent, nor fiscally responsible with the those dollars once they’ve been entrusted to lawmakers in the form of available revenue.
“If MDOT, MDE, the state Bond Commission and lawmakers can’t be bothered to be smarter stewards of the money they already receive then it’s hard to fathom why Mississippians should be expected to dig deeper and give them more.”
Supporters of the internet sales tax fail in their attempted explanations of the tax as a legal remedy to explain that it is currently understood to be federally unconstitutional. They instead try to justify the added collection as if it is righting a legal wrong.
“Some people are going to tell you it’s not a tax increase, it’s just an action that results in people paying more taxes,” Madison State Rep. Joel Bomgar said from behind the podium in the well of the Mississippi House on Thursday. “What kind of semantic games are we going to play with this? That’s the stuff they do in Washington. Let’s leave that in Washington.”
“If you take an action that results in everyone paying more taxes, that’s called a tax increase,” Bomgar reiterated. “This is a tax increase.”
Bomgar reminded House lawmakers that many of them spent much of the last summer dealing with the issue of taxes and the budget during hearings organized by Speaker Philip Gunn and Lt. Governor Tate Reeves. Bomgar also pointed out that the tax expert that spoke to the joint committee during the budget hearings advised strongly against any attempts to collect taxes on internet purchases.
“What we should be doing is focusing on growing our economy,” Bomgar said. “Every dollar we collect in taxes is one fewer dollar that Mississippians have in their pocket.”
Bomgar told his colleagues that the choice before them regarding the enforced collection of an internet sales tax is a matter of who is more qualified to spend Mississippians money: the people to whom it belongs or lawmakers who invent schemes to take it. He chided those who would vote to take money from the pockets of Mississippians, saying a vote for enforcing the internet tax is to tell the people that lawmakers “believe we’re smarter and we’re better at spending their own money than they are.”
Bomgar’s common sense response to misinformation cleverly managed to disregard the tactical confusion of whether the additional tax collection is or is not an increase in the technical sense. No need to get pulled into the weedy “semantics”. The bottom line is it’s an increase because it’s money the state hasn’t collected from out of state companies before now, and the law is, at best, presently foggy as to whether officials will ever legally be able to do so.
This means in order to collect lawmakers will have to devise a way to get consumers to pony up. The consumers also happen to be the voters and not many appear too keen on parting with more of their hard earned money.
While corporations are enticed to relocate here by the MS Development Authority by reducing or deferring their corporate tax rates, quite a few of these companies have been a bust, and have limped out of Mississippi having fallen well short of the benchmarks required in the tax deferment deals, and leaving state taxpayers to foot the bill and cleanup the mess.
Additionally, the Mississippi Economic Council and the Dept. Of Transportation decry the horrible shape of roads and bridges and the need to raise additional money to pay for safety updates, but only 3 months ago MDOT gave raises to 423 employees to the tune of $1.2 million.
If MDOT, MDE, the state Bond Commission, lawmakers and any other government official can’t be bothered to be smarter stewards of the money they already receive then it’s hard to fathom why Mississippians should be expected to dig deeper and give them more.
As Bomgar alluded to in his floor speech it’s a matter of morals.
It’s simple. It’s common sense. More importantly, it’s not the state governments money.