Online sales tax – for transportation

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September 28, 2012, 7:28 pm
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(NECN: Peter Howe, Boston)- For months, the drumbeat’s been growing louder for “Main Street fairness” – calls to subject online retail giants like Amazon.com to charging and collecting the same 6.25 percent states sales tax on purchases by Massachusetts residents as they’d pay at a physical store on Main Street or at the mall.

Now state Treasurer Steve Grossman is pushing a plan to link Main Street fairness to helping solve the fiasco that is transportation funding in Massachusetts, including a drowning-in-debt Massachusetts Bay Transportation Authority facing another $100 million deficit next year and a a $1 billion per year shortfall in funding for preventive maintenance and system operations.

“I think it's just a question of leveling the playing field. The Internet does not need that crutch any longer” of not having to charge sales taxes, Grossman said in an interview Friday. But beyond that, Grossman says after running the numbers, it’s clear that the estimated $335 million a year of extra sales tax that could be collected from levying it on online purchases could go a long way to easing the state transportation funding crisis many blame on the hangover of Boston’s $15 billion big dig.

By law, about one-sixth of the new revenue would go to the T, and another one sixth to state support for local school building construction and renovation. But that would still leave, according to Grossman’s aides’ calculations, enough cash flow to cover the interest and principal on a $3 billion bond issue to fund construction, plus $80 million a year in new “pay as you go” maintenance funding or operating support for the T and Massachusetts Department of Transportation.

“Public transportation, roads, bridges, transportation all over the state, broadband access -- all of that infrastructure and transportation investment we know we need to make, over 1 billion dollars a year, and this is a significant down payment,’’ Grossman said. “It’s about Main Street fairness, it's about using the money wisely, it's about making sure our infrastructure and our investment in transportation make us a winner of all the states.’’

It’s hard to find many people who argue in favor of keeping the Internet sales tax exemption. Many Massachusetts Republican leaders agree that in 2012, it no longer makes sense for well-established online retailers not to have to collect it, although many argue that the 6.25 percent rate should be cut.

At the business-backed Massachusetts Taxpayers Foundation, president Michael Widmer agrees with Grossman that “it is important that we find a way to tax online purchases. It's not fair that they're exempt from the sales tax.’’ But despite having helped lead a blue-ribbon transportation-funding-crisis panel in the 2000s that identified the $1 billion shortfall in what the state needs to be spending to maintain the road and transit networks, Widmer says it’s not a slam-dunk argument all the money should go to the priorities Grossman’s identified. “Transportation is one, of course, but public higher education, local aid, human services, health care, public safety -- there will be no shortage of claims on that money,’’ Grossman said.

And ultimately, while Amazon.com has been talking with the state about voluntarily beginning to assess and collect state sales tax on purchases made here, it looks like this issue will only get resolved in Washington by Congress, if it votes to repeal the 1998 Internet Tax Freedom Act, or let it expire, as now scheduled after President George W. Bush extended it in 2007, on Nov. 1, 2014.

With videographers Mike Bellwin and Kevin Krisak and video editor Bob Leone

Tags: Peter Howe, transportation, sales tax, online sale stax
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