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House Speaker Philip Gunn spoke out Friday in support of a bill to tax sales on the internet even as senators told Mississippi Today that the legislation faces an uphill fight in their chamber.
“HB 480 is a fair implementation of an existing tax,” Gunn said in his statement. “If anyone is serious about doing something with roads and bridges, this is the last train out. This is the best long-term opportunity we have to do something for roads and bridges.”
The bill, which passed the House 76-41 on Feb. 1, would require out-of-state businesses with more than $250,000 in sales but no physical presence in Mississippi to collect state sales tax from Mississippi customers.
Proponents of the bill say the proposal would level the playing field for the state’s small business owners and brick-and-mortar stores. Gunn for several weeks has advocated the proposed tax as a revenue source for roads and bridges improvements for the Mississippi Department of Transportation.
“The Internet Use Tax deserves a hard look,” Gunn said in the statement emailed to Mississippi Today on Friday. “This is good policy that provides an immediate solution.”
But opponents of the bill, including several Senate leaders, point to Washington, where Congress and the U.S. Supreme Court continue to consider whether states have the right to tax sales on the internet. The U.S. Constitution gives Congress the authority to regulate interstate commerce.
The senators also cite the existing, little-known “use tax” that requires Mississippians to annually pay sales tax on purchases made on the internet.
“We already have the use tax on the books which is essentially the same thing as what they’re talking about,” said Sen. Joey Fillingane, R-Sumrall, chairman of the Senate Finance committee. “If you already have a tax on the books that’s not being collected, instead of passing a new tax or the same tax under a different name, I think it makes a lot of sense to talk to the Department of Revenue and find out why we’ve not been collecting the ones on the books.”
Tuesday is the deadline for bills to be approved by Senate and House committees. If considered in the Senate Finance committee – and there is no guarantee the bill will even be called up for consideration – it faces opposition from many Republicans who have voiced strong opposition to imposing any new taxes.
Laura Hipp, spokeswoman for Lt. Gov. Tate Reeves, said earlier this month that any state action before Congress acts is a “precursor to litigation.” Hipp did not offer further comment when asked about the House bill this week.
Sen. John Polk, R-Hattiesburg, is a small businessman. He owns Polk’s Meat Products, a Magee-based meat production plant. He also sits on the Senate Finance committee, where the House bill awaits action. Polk said on Thursday that while the revenue interests of small business owners in the state are important, enforcing the existing use tax is a higher priority.
“To me, the playing field isn’t level for the mom-and-pop stores,” said Polk, who chairs the Senate Accountability, Efficiency and Transparency committee. “I can buy goods online and not pay a tax I’d have to pay at our brick-and-mortar stores … But the fact is that the use tax already exists. It’s just a matter of better collecting that.”
Fillingane, like many of his party’s contemporaries, said that his reservations on the bill boil down to his problem with raising taxes.
Sen. Terry Burton, R-Newton, the highest ranking senator as Senator Pro Tempore, said he has received several calls and emails from constituents asking him not to vote to raise taxes or levy new ones.
“I really don’t know what we’ll do with it (the House bill),” Burton said. “But we’re getting a lot of calls and emails saying don’t tax us anymore. It’s something other members are getting, and that will certainly be a consideration, I’d imagine.”
Enforcing the existing use tax has been tricky, Department of Revenue Commissioner Herb Frierson said last fall. But as the revenue department is studying ways to better enforce payments of the existing tax, eager legislators have remained committed to pushing the issue.
The House bill’s primary author, Rep. Trey Lamar, R-Senatobia, defended the bill on the House floor earlier this month, calling it a user fee on out-out-state internet businesses and not a tax increase. Lamar also said it was tantamount to “criminal tax evasion” to not pay sales tax on online purchases.
Lamar estimates the tax would generate between $50 million and $150 million per year. Gunn, in an interview with reporters in early February, said his office’s estimates were between $75 million and $125 million.
Provisions in the bill call for 70 percent of the funds to be used for roads and bridges; another 15 percent would go to counties for local roads and 15 percent would be distributed to municipalities to address their road needs.
Gunn, who sponsored a separate bond bill this session that would give cities and counties $50 million for roads and bridges, said earlier this month that he considered the internet sales tax proposal a viable solution to fund infrastructure improvements.
“It is the first step to addressing our roads and bridge problem, while simultaneously bringing in additional money that should already be collected,” Gunn said in his statement on Friday. “It makes good policy sense and addresses a need that is clearly the role of government.”
Gunn said he worked with MDOT, asking them to find $50 million in efficiencies in their existing budget and pledging to help find them an additional funding mechanism for repairs.
“Voting for HB 480 is a hard vote for some members, which I understand,” Gunn said. “Last year, we began to move away from an income-based tax system by phasing out the three percent income tax bracket.”
“I support HB 480 because it not only closes a loophole in our sales tax system, but it also conforms with a larger plan to shift our taxes collected to a consumption based structure, something I have repeatedly said we need to consider moving toward,” the Speaker said.
But experts within the past several months directly cautioned Mississippi lawmakers against implementing the internet tax.
Last fall, Gunn and Reeves brought in an economist from Washington-based Tax Foundation, who answered multiple lawmakers’ questions over several different group sessions about the potential for a Mississippi internet sales tax.
Economist Nicole Kaeding said the Tax Foundation’s stance on the issue is that Congress should regulate sales on the internet because they are considered interstate sales, and she cited potential legal problems if the state were to introduce its own legislation on the issue.
“It doesn’t really matter what we pass until Congress does something on a national level,” Burton said. “I don’t think we can force anyone in the state to pay internet sales tax until we know what we can legally do on the state level.”
Contributing: Zachary Oren Smith