LANSING – A bipartisan package of bills to be introduced this week would fix what the Michigan Retailers Association says is a fundamental issue of fairness that is lacking in the way the state collects taxes from online retailers.

Rep. Jim Ananich (D-Flint) and Rep. Eileen Kowall (R-White Lake Township) announced the bill package they called the Michigan Main Street Fairness Act, which would fix a loophole in the tax code that allows online retailers like Amazon to not collect state sales tax at the point of sale.

Jim Hallan, president of the retailers association, said the law would have online retailers placed under the same sales tax collection laws as retailers in the state. The legislation would change certain definitions so that online retailers with a distribution center in the state, or those that use affiliate businesses or create shell corporations to escape having to pay the tax, could no longer do so.

“We shouldn’t have this artificial barrier where a certain category gets a pricing advantage and another category doesn’t especially when they are investing in Michigan,” he said.

Hallan pointed to a study from Public Sector Consultants unveiled last week that said the state is foregoing $289 million annually in sales tax revenue because it cannot force collections by online retailers. And it said state could recover as much as $36 million of that if it adopts an affiliate nexus law.

Based on the results of a Pennsylvania study, the report said Michigan could see as much as $126 million in additional sales and 1,615 retail jobs because more residents would buy locally if they have to pay the sales tax on either purchase.

But achieving those numbers would require a change to federal law.

A 1992 U.S. Supreme Court ruling required a company to have a physical presence to fall under a state’s sales tax code.

Kowall said part of the thinking then was that it would be too difficult for these companies to comply and process the taxes assessed in each state.

“That was ’92, this is 2011. Technology has come a long, long way,” she said.

Kowall said the best solution would be a federal one, but until then, the state needed to act in its own self-interest to protect small businesses.

Ananich agreed.

“To me, this is about one simple thing – jobs,” he said.

A number of small business owners were also on hand Tuesday at the Capitol to highlight the problems with the current law.

Dan Marshall, president and CEO of Marshall Music, said he has to compete with the price offered by online retailers, but then has to go lower so that the sales tax he is forced to add onto the price is still competitive. He said the state was penalizing his business because of the uneven playing field.

This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com

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