Who pays what
To the Journal editor:
Businesses do not pay sales tax. Consumers pay sales tax. When you purchase something from a store, you are assessed a tax on the sale by the State.
You pay the sales tax not the business. The business is required by the State to collect the sales tax from you and send it to them.
When you purchase something from an out of state retailer (Internet, mail order, or direct retail purchase) and pay no sales tax, the State expects you to report the purchase and pay the tax on your State Income Tax Form 1040-MI, line 23.
If, for instance, you purchase a coat while on a trip to Minnesota, you would pay no sales tax because Minnesota does not charge sales tax on clothing. However, the State of Michigan expects you to report the purchase and pay the 6 percent sales tax with your income tax. If you purchase something in Wisconsin and pay 5.5 percent sales tax, Michigan expects you to pay the 0.5 percent difference.
The reason you currently pay no sales tax when you purchase something over the internet from a business located in another state is because Michigan has no right to force that business to collect the sales tax from you and send it back to Michigan.
Legislation being considered by the federal government would change this. The Marketplace Fairness Act (HR 684) would give Michigan the right to force businesses in other states to collect sales tax on purchases made by you and send the money to Lansing.
Likewise, Michigan businesses will have to collect sales taxes from their out-of-state customers and send the money back to their home state the money they collect will not stay in Michigan, as is widely believed.
This legislation places a huge burden on internet and mail-order businesses. They will have to keep track of the sales tax laws in the 45 states that charge their citizens a sales tax. Plus, they would be open to audits by every state, not just Michigan. The State of New York recently increased their Sales Tax Audit staff from 6 people to 261!
This is invasive legislation. It greatly expands the rights of a State to enforce it’s laws on businesses in other states. It does nothing to “level the playing field” between Main Street and Internet businesses. It is a way for the State to collect more sales taxes from you.