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States get creative to tax online sales

John Dimsdale Mar 18, 2010
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States get creative to tax online sales

John Dimsdale Mar 18, 2010
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TEXT OF INTERVIEW

Steve Chiotakis: As the states scramble to close budget deficits this year, one revenue source has begun to pop up as an increasingly popular option: taxing online sales. But that’s not an easy fix. Back in 1992, the Supreme Court said retailers that don’t have a physical presence in a state cannot be forced to collect local sales taxes. That’s costing states billions of dollars in lost revenue. Marketplace’s Washington Bureau Chief, John Dimsdale, is with is live from D.C. this morning. Hi, John.

John Dimsdale: Good morning, Steve.

Chiotakis: So how are the states trying to circumvent that Supreme Court ruling?

Dimsdale: Well, they’ve got several different ideas. The latest effort by a couple of states is to argue that online retailers that advertise to shoppers in their state is the same thing as having a physical operation in that state, and therefore that marketer would have to collect and turn over to the state or local government the appropriate sales tax revenue.

Chiotakis: But there are different sales taxes in every state, and even cities. I mean, doesn’t that make it really hard for companies to collect the appropriate tax?

Dimsdale: Exactly, that’s the argument that online retailers make. You know, all sorts of variations — some states charge taxes for groceries or clothing, others don’t. So there’s now a group of about 23 states trying to come up with a standardized set of tax rules that online sites could then use for everyone.

Chiotakis: And it seems, John, like the lack of sales taxes online gives these Web sites an advantage over traditional bricks and mortar stores, right?

Dimsdale: Yeah, that’s true, and some states are trying to enlist lobbying support from those stores, because, arguing that hey, you’re at a competitive disadvantage. But now, so many retail stores have online sites, they’re less inclined to collect taxes. So states have to get more creative about ways to persuade e-commerce sites to level the playing field with the more traditional stores.

Chiotakis: Marketplace’s John Dimsdale in Washington this morning. John, thanks.

Dimsdale: Thank you.

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