PERRY/Amazon collects ‘use tax’
Wednesday, February 1, 2017 6:00 PM
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.
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.
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
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.
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,
Harrison notes that according to the Department of Revenue, 35 of the top 50 “e-retailers” in the state already collect use tax.
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
So why would Amazon agree to do this voluntarily?
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
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 email@example.com or @CapstonePerry on Twitter.