With only days or weeks left in the legislative session, a bipartisan group of legislators and business leaders made a renewed push Thursday for a proposal to force online retailers to collect state tax.
“In this system local retailers are becoming showrooms where customers can shop for merchandise, and then make their purchases online to avoid sales tax,” said Mike Drury, owner of Drury Furniture of Fountain, Minn.
The change, which has the support of DFL Gov. Mark Dayton, would require Internet retailers like Amazon to collect state taxes when Minnesota customers buy online. Minnesotans are supposed to pay state taxes when they buy online, but only a tiny fraction of Minnesotans actually do, according to state officials.
Traditional retailers like Target and Best Buy, which have invested billions of dollars in stores and employees, argue the law gives an unfair advantage to online retailers, whose prices are automatically lower depending on the state tax rate.
“By not collecting sales tax, online retailers create the perception that online is ‘tax free’ and therefore costs less,” said Roberta Bonoff, owner of Creative Kidstuff. “This unfair tax loophole is exploited at the expense of Minnesota merchants -- merchants who invest in Minnesota property, payroll and philanthropy.”
The proposal has stalled at the Capitol, where a influential faction of Republican legislators call it a clear cut tax increase, something the party has successfully fought hard for years. They argue that the additional revenue leads to more government spending.
Minnesota Revenue Commissioner Myron Frans said the change would only bring in an additional $3.5 million next year, growing to $10 million over the next two-year budget cycle.
Companies like Amazon, which have pushed for a uniformed change at the federal level, have threatened to close down their affiliates in states that impose the change. The company has cut deals with states like California, eventually agreeing to collect the tax.
“This common sense legislation moved through the Senate Jobs and Economic Growth Committee with the strong bipartisan support of every member of the committee,” said Sen. Geoff Michel, an Edina Republican who chairs the Senate jobs committee. “Now is the time for us to level the playing field for this important segment of Minnesota’s economy.”