Stillwater News

Editorial: State law to collect on tax on internet sales has no teeth

Released:Jan 17, 2017

Guest Editorial by Norman McNickle, City Manager of the City of Stillwater

Photo of City Manager Norman McNickle
City Manager Norman McNickle

 

 

 

 

 

 

 

 

 

For those of you who are excited about the passage of House Bill 2531, maybe you should take a closer look.

Hailed by many as the answer to the collection of sales tax for online purchases, HB 2531 suggests that Amazon, eBay, QVC and other online retailers provide customers with records of their purchases so they can pay local sales tax on their income tax. It does not require online retailers to report customers’ purchases to the state.

For a state that balanced its budget with $200 million in debt last year, it’s hard to understand why our state legislators are not interested in collecting what is due.

It’s doubly hard for Oklahoma cities to understand. Oklahoma is the only state where municipalities are almost entirely dependent on sales tax for general operations. This includes most of the services residents expect and depend upon — police, fire, roads, bridges and more.

It’s also hard for our local retailers to understand. Why would customers shop in local stores where they have to pay the 8.813 percent sales tax? In other words, our neighbors who run local shops are at an 8.813 percent disadvantage when compared with online retailers.

Who is looking out for Oklahomans?

Recently, both Colorado and Louisiana passed legislation that actually has some teeth. In these bills, online retailers are required to report customers’ purchases to the state. Interestingly, internet retailers found the reporting requirement more difficult than simply collecting and remitting the tax, which they now do.

Of the top 500 online retailers, only 171 collect and remit sales tax for Oklahoma.

If the City of Stillwater had received sales tax on every online purchase last year, it is estimated that the city would have approximately $3.5 million more to serve the public with. Similarly, the State of Oklahoma would have collected about $300 million.

Let’s be clear. This is not a new tax. This is a tax that has not been collected. Instead of addressing the issue, many Oklahoma legislators are saying, “We need federal intervention to solve this problem.” However, the United States Court of Appeals, Tenth Circuit, of which Oklahoma is under, recently upheld the Colorado law. In fact, the U.S. Supreme Court even declined to hear the appeal.

So, Colorado is now receiving sales tax from Amazon and other online retailers. Why not Oklahoma?

Back to HB 2531. All it does is require Oklahoma residents to keep track of their purchases from out-of-state retailers and pay a tax on their state return each year, but right now only 4 percent of taxpayers do so.

Internet retail is here to stay, but changes need to take place so that Oklahoma cities can serve their residents and small businesses in the manner they deserve. Either we can allow Oklahoma cities access to property taxes, or we can simply pass the Colorado or Louisiana bill this session.

Call your legislators and tell them we want what is due to our communities. HB 2531 was not the answer.

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