Taxes should be collected for online sales

If Michigan lawmakers are successful in passing measures to collect sales tax from online purchases, it could be the beginning of some major relief for small businesses around Superiorland – and for the cash-strapped state government.

Bills with backing from both Democrats and Republicans are under discussion in the state House. The proposed legislation would tap into the estimated $460 million in unpaid taxes racked up every year from online sales.

Giant e-tailers would have to begin charging sales tax if they have distribution centers or warehouses in Michigan or are affiliated with in-state businesses linking customers to the retailers’ sites.

We agree with the Michigan Retailers Association, which backs these bills. We’re confident new laws will bring in additional tax revenue

More importantly, the new rules will level the playing field for local businesses that must, by law, collect sales taxes.

The current tax system gives an unfair advantage to online retailers who don’t collect the tax. It’s essentially an automatic 6 percent discount – difficult or impossible for a brick-and-mortar businesses to match.

On their state tax returns, consumers are supposed to declare all purchases made over the phone or online and pay a 6 percent use tax. Compliance with this law is low.

Michigan’s proposed law would capture some of the online sales taxes owed, but there are loopholes. It only applies to Internet retailers with ties to the state. And those stores could cut relationships with Michigan in order to get around the law, as has already happened in some other state’s which have passed similar measures. Federal action is the real key.

The U.S. Senate passed legislation Tuesday that would give states power to force online retailers to collect state and local taxes.

It’s unclear whether the U.S. House will take up the online tax measure now that it’s cleared the Senate. We urge them to do so quickly.

For now, the proposed Michigan approach is the best option.

We’re not saying state or federal governments should raise taxes – or penalize anyone. We’re just advocating a more level playing field for all retailers, physical and virtual.

Absent action from Washington, Michigan needs to act to protect the state’s small businesses.