The U.S. Senate didn't just do a favor for Target, Best Buy and smaller retailers Monday when it approved a bill that would allow states to collect sales taxes for online purchases. State governments stand to gain much too if they can collect upfront tax revenue that's now owed but largely goes uncollected, since the collection depends on voluntary disclosure of online purchases by individual tax filers.
The anticipated revenue gain for Minnesota: a whopping $400 million per year. That means that if online purchases were taxed in the same way that in-store sales are, the state would be out of deficit and the Legislature would be debating this year how to spend a modest surplus.
Gov. Mark Dayton is asking the 2013 Legislature to go as far as it can under current law, and tax the sales of online retailers who have an affiliate presence in the state. While that's worth doing, its yield is small potatoes compared with the gain that would come from federal legislation. In total, states stand to gain an estimated $23 billion if they can collect sales taxes on online purchases.
Revenue Commissioner Myron Frans praised the Democratic-controlled U.S. Senate for its 69-27 vote and urged the GOP-controlled U.S. House to follow suit. Its prospects there are not considered good. GOP House members tend to see sales tax fairness as a tax increase.
Technically, it's not. But it would make honest taxpayers out of Americans who are now taking advantage of an illegal but readily available tax dodge. They should know that failing to require online sellers to collect sales taxes is hurting not only their communities' local retailers and their employees, but also schools, law enforcement, nursing homes and other services governments provide.