Thanks to a 1992 Supreme Court ruling, Internet retailers do not collect sales tax from customers where the retailer has no major physical operation. Instead, Internet retailers' customers in states with sales tax are supposed to report their online purchases in their tax filings. Few do, causing states to lose an estimated $11 billion every year.<br><br>As a consequence, while local small business retailers follow the law and collect sales taxes from customers who make purchases in their stores, many online big business and catalog retailers do not collect the same taxes.<br><br>Federal legislation called the Marketplace Fairness Act would address this issue by requiring online retailers to collect sales tax from customers in states where the retailer has no substantial physical presence and remit them to each customer's state.<br><br>The legislation will level the playing field for brick-and-mortar small businesses that are in competition every day with large out-of-state online companies, while delivering additional revenue to state and local governments.<br><br>The legislation has two important caveats: First, there's a small business exemption for online sellers making less than $1 million annually. Second, it only applies to purchases made by customers in states where sales tax is already collected.<br><br>Additionally, the legislation requires states to make available, at no cost to retailers, software that helps calculate the state sales tax on remote transactions, as well as administrative services.<br><br>While federal legislation would level the playing field for small businesses nationwide, we have an opportunity to address this issue right here in Missouri. <br><br>Missouri is one such state that does not collect sales tax on for online purchases, which puts our small businesses at a disadvantage. <br><br>And Missouri and other states that rely on sales and use taxes to fund public services have been losing revenue as a result of a failure to capture taxes that are owed for online retail purchases through remote sellers. A University of Missouri study estimated that Missouri missed out on $358.3 million in state and local sales tax revenue in 2014. In addition to eroding Missouri’s ability to invest in critical public services like education, health care and safe roads, the failure to compel remote online retailers to capture sales and use tax also creates a competitive disadvantage for Missouri’s bricks-and-mortar retailers who are required to capture sales tax. This challenge could be addressed through a statewide Streamlined Sales Tax.<br><br>For more information on this, we are delighted to have Mike Sutherland from the Missouri Budget Project joining us today.
