Maybe Montana should take one for the team.
Why not? We are, after all, the best of America. We have the best scenery, the best writers and the best national parks. With climate change, we may soon have the mildest climate.
Our top elected official has not, so far as we know, paid off any porn stars, and our Legislature is a model of statesmanship and decorum compared to its federal counterpart.
Maybe rich folks like us should give the rest of the country a break. One way to do that would be to get our congressional delegation to support the Marketplace Fairness Act.
This is the act that would require Montana and the other four states without a state sales tax to collect and remit sales taxes on items sold online to customers in states that have sales taxes.
The issue is resurfacing now because the Supreme Court is expected in April to reconsider its decision in the Quill case, which established that retailers only have to collect sales taxes on items sold in states where they have a physical presence.
Here’s the problem. Let’s say a Wyoming resident goes into a Wyoming store and buys a sleeping bag. The customer is charged a 4 percent sales tax, which the store remits to the state government. But suppose the Wyoming resident buys the same sleeping bag online through a company that has no stores in the state. The retailer doesn’t have to charge a sales tax, and Wyoming has no way to collect it.
That doesn’t mean the tax disappears. In theory, the customer is still obligated to pay it. In practice, that hardly ever happens. Out-of-state online retailers are able to offer discounted prices subsidized by Wyoming taxpayers, including whoever owns the Wyoming sleeping bag store.
By 2012, failure to pay the so-called “honesty tax” was costing states nearly 4 percent of their sales tax revenues, or more than $11 billion. Some estimate the loss at more than $20 billion a year now.
Nobody knows how the Supreme Court will rule when it reconsiders the Quill case, but conventional wisdom is that the court will make at least some changes because the online market has changed so dramatically since the 1992 decision.
That in turn has rekindled interest in the Marketplace Fairness Act, which passed the Senate in 2013 but never became law. Both U.S. Sen. Jon Tester, D-Mont., and Sen. Steve Daines, R-Mont., have issued strong statements against the act in recent weeks. U.S. Rep. Greg Gianforte, R-Mont., has not taken a public position, so far as I can tell, and his response to my email was boilerplate that failed to answer the question.
Tester and Daines make a sensible argument. They say that Montana, with no sales tax, gains nothing from the bill but that it would impose new bookkeeping and regulatory requirements on small businesses in Montana that sell online. Those businesses would in effect become sales tax collectors for some 10,000 state and local sales tax jurisdictions across the country.
“It should not be the role of small businesses and entrepreneurs to help shore up the finances of states and localities through an online sales tax,” Tester said. Daines makes a similar argument and adds this: “The Internet sales tax could also become a backdoor channel to impose a sales tax on Montanans.”
Fair enough, as far as it goes. But Montana also has a stake in helping America sort out the disruptions caused by the online economy. It’s no secret that many so-called brick-and-mortar stores are in trouble: We feel the impact every day right here in Billings.
Nationwide, Sears and Kmart closed 358 stores last year, plus another 63 this January. J.C. Penney closed 138 stores in 2017, and Macy’s closed 68. RadioShack, Payless ShoeSource and Toys R Us have filed for bankruptcy within the last year.
Half of the nation’s malls are expected to close by 2023. Nationwide, we lost 66,500 retail jobs last year, far more jobs than President Trump’s enthusiasm for coal generated. Department stores alone lost more jobs than total employment in the U.S. steel and coal industries.
Online sales aren’t the only reason these companies are in trouble, but the internet makes every other problem worse. And this isn’t just about sales taxes.
Local communities across America have long depended on brick-and-mortar stores for property taxes, for business equipment taxes and for the income taxes paid by their employees. Moreover, we look to local stores to sponsor Little League baseball teams, to donate to fundraisers, to get behind blood drives. Montana may not get their sales taxes, but we need everything else they provide.
The rapid changes wrought by the online economy have cut across party lines. The 2013 Senate bill was sponsored by conservative Republican Mike Enzi of Wyoming, and 24 Republicans voted for it. Meanwhile, liberal Democrats in states without sales taxes have lined up in opposition.
The bill attempts to deal with the complexity of collecting sales taxes across multiple jurisdictions by exempting businesses with less than $1 million in annual online sales. It also requires states that wish to take advantage of the bill to adopt certain simplifications to their tax rules. Remember, the same technologies that made the online economy possible also make it possible to deal with the complexities of tax collections.
Maybe the bill’s attempts to deal with the complexities fall short of what is needed. That is what we pay people like Tester and Daines to figure out. But like it or not, America’s and Montana’s tax systems are sooner or later going to have to adjust to an economy that has changed forever.
I vote for sooner. America needs us.