From the Round Table: Return local revenue to black by taxing sales over Internet

Participants in the recent Chamber of Commerce retreat in Kansas City heard that economic conditions in the Columbia area now are essentially flat, with city and county sales tax revenue off by about 3 percent.

This came from presentations by Columbia City Manager Bill Watkins and long-time local statistician Jeff McClellan, chairman of the Landrum Co. With some light appearing at the end of the tunnel, full recovery from the 
malaise we’re in could be many months, if not a few years, away.

My own assessment is that three of the six cylinders of the region’s economic motor seem to be firing rather well. Both State Farm and Shelter Insurance are said to be relatively stable with a typically full slate of employees. Aside from some belt tightening in the healthcare and educational segments, the hospitals, schools in general, and area colleges and universities are holding up fairly well.

This leaves the three remaining pistons where the compression is definitely off – industrial, building and contracting, and retail sales. The valve job to bring compression back up to speed may be a protracted process. Industry has been weakened by closures and layoffs, but that’s the way it’s been everywhere across the land.

Building and construction has supplanted industry as a principal employer, with less reliability on a day-to-day basis because of the vagaries of weather, supply and demand, and the availability of raw material, which, of course, are factors in the ups and downs of sales tax receipts.

Sales tax revenue has also gone down about 3 percent because retail sales have declined. Does this mean total retail sales? Hardly! But it’s the retail sales that pass through brick and mortar enterprises firmly planted on Boone County soil, and that is what’s off by 3 percent.

Retail sales taxes have been with us since the Great Depression. Laws providing for them were enacted by states and lesser entities desperate for revenue. Some of those receipts went to the unemployed who were desperate for food and shelter. There has been a rise in rhetoric about tax “reform” that often borders on the fanatical but also includes proposals that are likely to fail because they make too much sense.

Saddled – perhaps forever – with the flawed system as it is, the least various government entities can do is to tax each and every electronic transaction – over the telephone, the Internet and other methods. That would restore fairness and balance to the system. Why this is not a greater priority with government bodies on all levels is astounding.

This may be the year Congress enacts legislation that would allow states to start collecting some $18 billion in consumer sales taxes from Internet, catalog and telephone sales. The ongoing blasé attitude shows some sign of breaking with 23 states – but not Missouri – represented on the Streamlined Sales Tax Governing Board that’s been pushing for this.

So what’s in the way? Not surprisingly, eBay has been lobbying heavily against any measure that would tax transactions that pass through its hugely successful Internet sales portal. eBay wants to exempt customers that do less than $20-million a year in retail sales from having to pay the tax, which one commentator claims would cut potential receipts in half.

With transaction computerization, the old canard about bookkeeping and accounting has been shattered. Twenty years ago – and this was well before the Internet became a factor – a major catalog retailer specializing in telephone sales had already figured out a way to program its computer to calculate all relevant sales and use taxes and was in fact remitting them.

It’s a little weary hearing officials complain about declining revenue because sales are off at local retail brick-and-mortar establishments. What an easy excuse to cite the siphoning effect of surrounding communities getting their own Wal-Mart Super Center obviating the need to shop in Columbia.

With Congress considering legislation to plug this ridiculous loophole, it’s time for each and every whining official to join the movement to terminate the exemption the Internet gained years ago because it was embryonic and needed to be coddled. Now the finger points back to us to create economic fairness by removing this exemption. We would get back the 3 percent tax loss and maybe then something even move novel: a reduction of sales tax by a percentage point or two. Imagine that!