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Tennessee Editorial FORUM | 10/26/2010
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Tennesseans Should Pay Their Fair Share on Internet Purchases

By Jenifer Tlumak

You've clicked and scrolled and finally found that perfect something online. From books and clothes to furniture and appliances, pretty much whatever you want can be found from web retailers.

You virtually check out and notice the fine print at the bottom of your computer screen, which reads something like: Colorado residents must pay 6.5 percent tax. And you breathe a sigh of relief thinking, Sure glad I live in Tennessee!

Your Internet deal turns into a steal when you get away without paying a cent in sales tax. It seems like a win-win, but there's a loser in this game, and ultimately, it's you, me, and the state of Tennessee.

When we make purchases through online vendors and don't pay sales tax, our state does not collect those revenues. All Tennesseans are legally obligated to pay a use tax on out-of-state purchases -- including Internet and catalog sales -- but many don't know how to, or figure that they will wait to pay it when they are notified by the Department of Revenue. According to a study done at the University of Tennessee, our state is missing out on about $300 million in revenue annually from out-of-state sales to Tennesseans. Supporting vital state services, like roads, schools, parks, libraries, law enforcement, emergency response and other public structures is essential. And we need money to do it.

What's more, stores in Tennessee with a physical (not just an online) presence, whether mom-and-pop outfits or corporate chains, are put at a competitive disadvantage since they must charge sales tax to their customers. It's only fair that their online competitors be required to do the same. Local shops employ our citizens and provide income and benefits to tens of thousands of Tennesseans and their families. Reducing the ability of these businesses to succeed could limit the ability of our citizens to prosper.

To help remedy the situation, Tennessee is now considering a proposal that will improve tax collections by requiring out-of-state sellers who do not collect sales tax to notify their customers at the time of purchase that they may owe sales (use) taxes to the state. They will also be required to report annually to each purchaser and to the state Department of Revenue the total of their purchases. These measures will provide taxpayers the information they need to pay their taxes and to monitor the compliance of the vendors they patronize. Vendors may avoid the reporting requirement by collecting and remitting the sales taxes.

Since part of the sales tax collected by the state is shared with local governments, this measure could increase that shared amount by as much as five percent. This would reduce pressure on local governments to raise property taxes.

For the sake of the Volunteer State, let's volunteer to pay what we owe. You can fill out an estimated use tax form at: www.state.tn.us/revenue/forms/sales/r0000501.pdf. Paying a token amount will emphasize the difficulty in calculating the tax without information from the vendor. Let's show that we appreciate our government and the services that it provides for all Tennesseans.

Tlumak is a Tennesseans for Fair Taxation board member.

 
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