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Bid for online sales tax likely doomed again

By Lauren Gibbons
Capital News Service

LANSING — The fight to impose a sales tax on online businesses is fizzling once again with the end of legislative session.

The likely doomed legislation, sponsored by Reps. Eileen Kowall, R-White Lake Township, and Jim Ananich, D-Flint, would amend the sales tax law to include online businesses.

The bills were an attempt to hold the booming online sales industry to the same tax-collecting standards as its brick-and-mortar counterparts.

But with the end of the legislative session rapidly approaching, hopes of continuing the discussion about an online sales tax, let alone getting the legislation through the lame duck House and Senate, grow increasingly slim.

Because of a loophole in current tax law, sellers online don’t need to collect the sales tax unless they have a brick-and-mortar business in Michigan. Technically, online consumers are supposed to report their online purchases and pay a 6 percent use tax, but few do, said Tom Scott of the Michigan Retailers Association.

Supporters argue that such a change would level the retail playing field and bring in more tax dollars. The measure has support from both sides of the aisle, but some legislators have expressed concerns that it would make online shopping more confusing for both the buyer and the retailer.

Tom Lenard, spokesman for Ananich, said there’s a small hope the committee will take a look again next week, but the issue of online sales taxes will continue even if it has to get taken up again next year.

“It’s not an issue that’s come up out of nowhere,” Lenard said.

Tax Policy Committee member Rep. Jim Townsend, D-Royal Oak, said hasn’t heard plans of the bill coming up again this year since a scheduled discussion on the topic was canceled. He said the concept of sales tax regulation on such a widespread level is better suited for nationwide legislation, but inaction from Congress should encourage state legislators to take the matter into their own hands.

“We ought to have a level playing field for online retailers and we don’t,” Townsend said. “It’s an issue probably better solved at the national level, but it’s not getting solved on the national level right now.”

In the mind of business owner Dan Marshall, any change in online sales tax would be beneficial for retailers struggling to compete.

As the owner of the Lansing-based statewide chain Marshall Music, Marshall has experienced firsthand the issue of shoppers coming into his stores to try various instruments and subsequently using their smartphone to search for the cheapest price online.

“Every day, every hour, I have people come in and look at products, and my staff helps them select the product that best fits their needs,” he said. “They’ll scan the UPC code with smartphones that will tell them where the cheapest price on the product is.

“We’ll try to match it, but we just can’t discount it to eat the sales tax,” he said. “Marshall Music is perfectly comfortable operating in a competitive pricing environment, but if some should collect sales tax, all should collect sales tax. We’re put at a competitive disadvantage.”

The fight for tax parity in online sales has dragged on for years, but to many brick-and-mortar retailers, the issue remains pertinent, Scott said.

Despite the likely failure challenges to get legislation through this year, he said retail businesses will continue to make it a top priority.

“This is our number one legislative issue,” Scott said. “We’d love to get this passed, but the ultimate solution has to come from Congress with national legislation. Until then we have to work from the state level.”

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