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Virtually untaxed: Marketplace Fairness Act targets online sales

Congress pondering measure that would virtually eliminate the ability of consumers to avoid sales taxes when making online purchases.
by Brianna Bailey Modified: April 27, 2013 at 1:38 am •  Published: April 29, 2013

Like many bricks-and-mortar store owners, Morgan Harris, who owns the Oklahoma City cloth diaper and eco-friendly baby store Green Bambino, laments the fact that Internet retailers don't collect sales tax.

Technically, shoppers are supposed to report any sales tax they might owe on their state tax forms each year, but most don't, Harris said.

“It's money that the consumers already owe, so why wouldn't you just shift the burden of payment from the consumers to the sellers,” Harris said. “We are used to doing anyway — it's part of our business model.”

Harris was part of a group of Oklahoma City business owners who traveled to Washington, D.C., in 2011 to talk with lawmakers about forcing Internet retailer to collect sales tax.

Pending legislation in Congress called the Marketplace Fairness Act would require large Internet retailers to collect sales taxes — a problem that state and local officials say costs Oklahoma millions of dollars in tax revenue each year.

Many retailers complain of the practice of “show-rooming,” where shoppers will visit a bricks-and-mortar store to test out a product and then purchase it on the Internet to avoid paying sales tax.

Generating local sales tax revenue is one more reason to support local merchants, Harris said.

“If you don't pay sales tax, that money isn't going to pay for things like police and firefighters — those things are at risk,” she said.

Sales tax gap

The Oklahoma Tax Commission estimates that the state loses from $185 million to $225 million in tax revenue from Internet sales each year.

“However, that's a difficult estimate to make because of the fact that this is money that isn't being paid,” said Paula Ross, spokeswoman for the Tax Commission.

Oklahoma City Mayor Mick Cornett estimates that the city loses more than $10 million each year in sales tax revenue from Internet sales.

“That would pay for 100 firefighters or 100 police,” Cornett said.

Cornett has long been a supporter of having Internet retailers collect sales taxes for the states as cities across the country are struggling more than ever to cover the cost of public safety and new infrastructure.

“This is not a new tax — this is tax that is currently owed, but there's no proper way to collect the tax,” Cornett said. “Many municipalities get over half of their revenue from sales tax — if we don't figure out a way to collect what is owed, we are not going to have money for police and firefighters.”

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by Brianna Bailey
Business Writer
Brianna Bailey has lived in Idaho, Germany and Southern California, but Oklahoma is her adopted home. She has a bachelor's degree in Journalism from the University of Oklahoma and has worked at several newspapers in Oklahoma and Southern...
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It's money that the consumers already owe, so why wouldn't you just shift the burden of payment from the consumers to the sellers.”

Morgan Harris,
Green Bambino owner


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