Amazon now collects tax from online purchases made by its customers in Mississippi, and will remit an estimated $15-$30 million a year to state coffers. The collection is new; the tax is not.

When you pay 7 percent more on your Amazon purchases, put some of the blame on Governor Theodore G. Bilbo.

At Bilbo’s urging, the Mississippi legislature passed what some consider the nation’s first general sales tax in 1930. Bilbo encouraged the tax; vetoed revenue bills without the tax; and then refused to sign the tax, allowing it to become law without his approval.

Newspapers across the state denounced the policy. Prognosticators predicted the red tape would cause a tax revolt against every legislator who voted for it. The massive tax increase – which was on a sliding scale based on products – averaged about one-quarter of one percent.

The Morning Call, a newspaper in Laurel, called the policy “disastrous” and opined in 1930, “A business in a state where there is no sales tax could sell in Mississippi at a lower figure than Mississippi companies themselves, simply because the latter would be compelled to pay a tax on their sales whereas the former would not.”

To address that argument Mississippi adopted a “use tax.” A use tax is owed by consumers who purchase goods from out-of-state. (Out-of-state sales tax paid can be credited toward the use tax owed.) According to the Mississippi Department of Revenue, “use tax protects Mississippi vendors from unfair competition from out-of-state sellers, since the Mississippi merchant is required to collect sales tax when selling to a resident or business.”

Adding the same burden to out-of-state goods as the sales tax of in-state goods is solely an equalizing action to affect consumers. It effectively is a protective tariff.  The out-of-state business receives no direct government benefit, nor does it use government services in return for those taxes.

That is the same argument used by the Department of Revenue to explain why municipalities in Mississippi don’t get a share of use tax.

Bobby Harrison, writing for the Northeast Mississippi Daily Journal last week, noted unlike sales tax - of which 18.5 percent of revenue is returned to municipalities - local governments do not get a piece of use tax:  “Kathy Waterbury, a spokeswoman for the Department of Revenue, said the theory behind not diverting the use tax to the municipalities ‘is, unlike a brick and mortar business, the cities don’t have to support that business through providing police and fire protection, roads, etc.’”

Harrison notes that according to the Department of Revenue, 35 of the top 50 “e-retailers” in the state already collect use tax.

Bills to impose the mandatory collection of use tax (as well as administrative rules under consideration by the Department of Revenue to do the same) are moving forward this year. Similar actions by other states resulted in litigation as the Supreme Court has ruled this a clear purview of Congress under the Constitution’s interstate commerce clause.

So why would Amazon agree to do this voluntarily?

It isn’t just Mississippi. The Associated Press reports other states utilizing voluntary Amazon use tax collections starting early this year include Missouri, Rhode Island, South Dakota, Vermont, Louisiana, Iowa, Nebraska, Utah and Wyoming. Amazon has already been collecting use tax in many states.

By voluntarily collecting the use tax, Amazon avoids the threat of audits and pressure from states. Those are unnecessary headaches for a company of Amazon’s size and market share which allows it to devote resources toward managing the tax regimes of different localities.  Some of Amazon’s smaller competitors may find that cost of business more difficult which provides a competitive advantage to the established Amazon.  Further, while Amazon launched as a discount book seller with success by providing cheaper products, its model has now transformed into delivering convenience over price. A 7 percent increase in Mississippi doesn’t diminish the convenience.  Finally, it doesn’t cost Amazon anything. The use tax is collected from the consumer and passed on to the state.

I think a use tax is ridiculous policy. That another state does not tax its products as high is not “unfair competition.” Rather than allowing in-state business to compete by lowering taxes, the answer is to add an otherwise unnecessary tax to out-of-state business. But you know who doesn’t think it is ridiculous? All 45 states with a sales tax also have a use tax.  So thank Governor Bilbo. Ridiculous or not, it is the law and has been for generations.

All Mississippians who order online – or over the phone, by mailing a form, or yelling across the state line – and do not pay sales tax already owe use tax and are required to file those taxes with the Department of Revenue. Few do; enforcement is lax; but this is not a new tax.



Brian Perry is a columnist for the Madison County Journal and a partner with Capstone Public Affairs, LLC. Reach him at reasonablyright@brianperry.ms or @CapstonePerry on Twitter.