The free ride for e-commerce may be over soon.
The daily grind of lawmaking will commence once the gavel comes down in legislative chambers March 12, but debate has already begun on the budget submitted last month by Gov. Jindal. It seeks to cut a projected $895 million shortfall by eliminating 6,400 state jobs, revamping the state pension system and privatizing some prisons and health centers. To balance somewhere north of $25 billion, it pools several sources of one-time revenues but includes no new taxes.
This is a no tax session. Per Louisiana law, revenue enhancements can only be filed in alternate years unless a governor calls a special session. There is scant chance of that this year, given Jindal’s desire to protect his pristine tax-free résumé and aspirations to move up the political food chain. Meanwhile in cash-strapped states across the country, the idea of a levy on e-commerce, called an Amazon tax, is gaining traction. Louisiana’s version came very close to passing last year. Perhaps it’s time to take another look.
These taxes, nicknamed for the online behemoth Amazon, would impact all online shopping, a niche that has flourished since the 1992 Supreme Court limited states’ rights to collect taxes unless an e-tailer has a physical location within that state. The intent to tax these transactions was clearly implied but the court decided in part that computing such widely varying tax rates was unwieldy. Purchasers should be paying on the honor system, but few do, and technology has changed. Today, online customers can choose from a variety of shipping rates with a single mouse click; the addition of jurisdiction-specific taxes is a no-brainer.
Perhaps cyber stores needed the tax break as start-ups, and we all love the benefits of shopping online, but now that it’s entrenched and growing (up 13 percent in 2011), isn’t the industry mature enough to step onto a level playing field? With tax rates that vary from 5-10 percent depending on the state, online companies enjoy a clear price advantage over the brick-and-mortar businesses that support — and comprise — communities all across America.
These traditional retailers are located in malls and on Main Streets in states that badly need the revenue these taxes can bring, and Louisiana is no exception. While some categorize Jindal’s budget as lean and responsible, the poor in our state are going to be profoundly impacted, particularly when it comes to health care services. And given the fulcrum of one-time revenues that so precariously balances this year’s budget, what happens next year when these revenues disappear?
An Amazon tax could help. “This is not a new tax,” says U.S. Sen. Lamar Alexander of Tennessee (also former governor). “This is a tax that is already owed.” He is co-sponsoring the bi-partisan Marketplace Fairness Act in Congress, which has broad support within the GOP, including former Mississippi Gov. Haley Barbour. And with the specter of state-by-state battles ahead, even Amazon has given the nod to this move toward a common federal standard for online collection. But some states have already cut their deals with Amazon, negotiating distribution centers that create jobs as part of the package. Perhaps our governor can take a cue from his former Southern counterparts and get onboard before the federal legislation powers up. It could help give Louisiana some fiscal stability, and that’s just good business.