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LEXINGTON, Ky. - Federal legislation (The Marketplace Fairness Act) to tax Internet sales has cleared the U.S. Senate, sending the issue to the House. The issue pits closing a loophole and generating more tax revenue against those opposed to any tax increase and the companies who sell their products by catalog and the Internet.
Beth Evans, who owns an old-fashioned toy shop in Lexington, is all for taxing Internet sales. However, she said, she's come to accept the trend.
"I don't think it will ever be a level playing field again, I really don't," she declared. "I think there will be people who will say, 'Oh, what the heck, I'll go on and buy it now. You know, I'm going to have to pay tax.'"
Currently, states can only collect sales tax from retailers with a physical presence in the buyer's state.
According to Jason Bailey, director of the Kentucky Center for Economic Policy, the tax would strengthen the "economic backbone" of communities.
"It's fairness to Main Street businesses, local businesses that sell local communities," he stated. "They're essentially at a 6 percent disadvantage in Kentucky because they charge sales tax when you make a purchase."
Bailey said taxing Internet sales would also be fairer to people who don't have broadband Internet access. But opponents see it as another tax hike and a regulatory mess.
A University of Tennessee study projects the annual loss of sales tax revenues nationwide at $23 billion, including $224 million in Kentucky. Bailey is a member of the governor's tax reform commission, which projected a smaller windfall from taxing Internet sales.
"Realistically, probably $130 to $200 million in additional revenue" could be expected, he said. "We don't know exactly how much it will end up being, but that's a good chunk of change that would help our budget situation."
In the view of toy store owner Beth Evans, most Internet buyers don't think about how their savings affect their home states.
"I don't think people realize today how much money is lost for the schools and the roads and just everything that involves our local economy that depends on sales tax," Evans said.
Kentucky has cut $1.6 billion out of the budget in recent years.
