Level the sales tax playing field

One good thing about being old (ok, relatively old) is that you have institutional memory. And that comes in handy regarding policy issues, because very few issues are completely new.

Being able to recall and even document what has happened before can be quite useful in discussing the issues of today.

Such is the case of the South Carolina Tax Realignment Commission’s (TRAC) recommendations of how to make changes to our state’s tax structure in order to make it more “balanced,” resulting in a system that is “adequate, equitable, and efficient.”

TRAC held a public hearing last Friday to allow the public to weigh in on its recommendations, two dealing with the collection of sales tax on internet purchases that are tied to South Carolina businesses.

This whole problem of states collecting sales tax from purchases over the internet has been around for some time. Back in 2002 it was an issue that many states were trying to collectively address. Back then, the estimate was $13 billion in sales tax that states and local governments were not collecting from internet sales — $153 million in South Carolina. Today these numbers must he far, far greater.

By law, if you make a purchase over the internet from a business located in another state, and you don’t pay that state’s sales tax, then you are supposed to declare that purchase at tax time and pay South Carolina’s sales tax.

(I’m now waiting for you to either stop laughing or stop worrying about how much trouble you’re in.)

In a letter dated January 29, 2002, here is what The South Carolina Small Business Chamber said in a letter to the Legislature regarding a proposal to exempt internet purchases of under $10,000 from the “use tax.”

The Small Business Chamber believes that the state should not be encouraging the public to make purchases via the internet rather than buying from South Carolina brick and mortar stores. The state should not be creating an uneven playing field when it comes to “use tax” or sales tax collection. This would be unfair to the tens of thousands of small business owners in our state who collect sales tax, pay their property taxes, employ our workers and support our schools, churches and community activities.

The TRAC recommendation on trying to capture sales tax from internet sales of businesses with ties to our state makes sense. We should be pursuing all “use taxes.” The reduced price of goods purchased via the internet should be due to less marketing, personnel, overhead and inventory costs — not because sales taxes are being avoided.

Inspired by initiatives like the SCDA’s “Certified SC Grown” program, the SC Small Business Chamber has launched a free online directory of SC-owned small businesses with less than 100 employees at http://www.buysc.org. Visit BuySC today to add your business to the site, and let’s work together to support the success of small business in South Carolina.

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