State wants online retailers to collect sales tax

HARTFORD, Conn. (WTNH)– Retail stores are already gearing up for Thanksgiving and Black Friday sales. The biggest online shopping day follows with what’s now known as Cyber Monday. Now, governors around the nation are pushing to find a way to also make it a big tax collecting day.

State governments around the country, including here in Connecticut, are having cash flow problems. Governor Malloy is expected to announce a roster of spending cuts later this week, as projections for red ink in the state budget indicate he has no choice. He is also pushing for a new revenue source that he can say is not a tax hike.

Along with other governors, Malloy is urging Congress to pass federal legislation allowing the states to collect sales tax on all internet sales. Although some might consider this a new tax, it’s actually a more efficient way to collect a tax that’s already on the books. It’s a tax that you’re legally obligated to pay even though no one does, and it’s a lot of money.

“For Connecticut, that would probably be worth something like $135 million of revenue that’s not being collected,” said Connecticut Revenue Services Commissioner Kevin Sullivan.

A year ago, the online retailer Amazon agreed to collect the Connecticut Sales Tax, and it is estimated that alone brought $15 million to the state. However, it would require federal action to require all other online retailers to collect it.

“It just happens that we have this dispute because the technology of the internet came after all of the Sales Tax statutes of the nation,” said Sullivan.

“You pay Sales Tax when you purchase something in a store, why wouldn’t you pay Sales Tax when you purchase something on the internet?” said Tim Phelan, President of the Connecticut Retail Merchants Association.

Mickey Finn’s sporting goods in Berlin is about to be awarded the retailer of the year award by the Association. They have a firm position that online retailers should have to collect the Sales Tax on every purchase just like they do, in order to level the retail playing field.

“The online retailer has a built-in price advantage over the brick-and-mortar retailers,” said Phelan. “It’s just an issue of fairness.”

Malloy and some of the other governors would like to see Congress move on this before the end of the year, but reports from Washington say the chances of passing the so-called “Marketplace Fairness Act” are not very good this year.

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