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Internet sales tax issue debated


August 25. 2013 9:01AM
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LIMA — With a few clicks, you purchase your goods. Many times they come without shipping costs. And, almost always, no sales tax.


Wonderful, you say? Not if you’re a retailer with a physical presence. They believe companies selling goods online have an unfair advantage and are seeking to level the playing field with the Marketplace Fairness Act.


Local business owners Nate Gast with Custom Audio Concepts and Michael Frueh with Longmeier Printing have testified in Washington in favor of the effort, which would. The measure is also supported by the National Governors Association and the National Conference of State Legislatures, because of the $23 billion in uncollected taxes they say would be raised for state treasuries.


While some view the issue as closing a loophole, others say it is the same as a tax increase. Some conservatives oppose the idea, saying the bill expands the authority of states to tax out-of-state retailers and subjects businesses and consumers to countless local tax schemes.


Frueh is working with the state branch of the national lobbying group Alliance for Main Street Fairness on the issue. Frueh estimates that he’s lost thousands of dollars in sales to online competitors that can charge up to 7 percent less because they don’t pay sales tax.


“The bipartisan support the Senate showed was very encouraging, so it feels like we have the wind at our back on this very important issue. However, we can’t let up our guard. It’s been a long road to this point, and there’s still a ways to go. That’s why we’re asking our representatives in Congress for their leadership on e-fairness.”


The Senate passed the bill on a bipartisan 69-27 vote in May, according to Stateline. That included support from both of Ohio’s senators, Republican Rob Portman and Democrat Sherrod Brown. However, conservatives in the House see the issue as a tax increase. While the bill has been introduced in the House’s Judiciary Committee, there has been no movement, U.S. Rep. Jim Jordan, R-Urbana, said.


“Higher taxes will only hurt families and curtail job growth,” Jordan said. I will oppose this bill if it comes before the Judiciary Committee.”


The issue comes from a 1967 U.S. Supreme Court decision, in a case dealing with mail order sales, which states that a company must have a physical presence in a state to impose taxes on its sales. Technology has brought a slew of online businesses that have sales only online and don’t charge sales tax.


In lieu of a federal law change, 44 states, the District of Columbia, local government and the business community have worked together voluntarily on the Streamlined Sales and Use Tax Project. The effort is aimed at simplifying sales and use tax collection and administration by retailers and states. It encourages remote sellers selling over the Internet and by mail order to collect tax on sales to customers living in the streamlined states. It levels the playing field so that local “brick-and-mortar” stores and remote sellers operate under the same rules.


Earlier this month, Gov. John Kasich signed an executive order to apply for Ohio’s full membership in the streamlined project. Ohio has been participating on an “associate” basis, Kasich said, because Ohio had rules for intrastate sales in conflict with rules prescribed by the streamlined project. In May, the project governing board amended the rules, allowing Ohio to become full members.


Kasich is attempting to modernize Ohio’s overall tax structure and said simplifying the process across multiple states will be helpful to retailers operating in multiple states.


Also, Ohio lawmakers included language in the state budget that would mean lower income taxes with the passage of the Marketplace Fairness Act. If the federal legislation passes, it would trigger a mechanism that would direct revenue to the Income Tax Reduction Fund, which automatically funnels year-end surplus money into temporary personal income tax rate reductions.


“Ohio is showing the country how e-fairness legislation should be used to lower income tax rates. When Congress acts, Ohio taxpayers will have more money in their pockets thanks to this pro-growth budget,” said Gordon Gough, chairman of the Ohio Alliance for Main Street Fairness. “We are one of the first states in the country to use this innovative legislative model to lower the burden on taxpayers by closing loopholes in the tax code.”




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