Case review may provide bridge to new revenue
As state officials scramble for resources to address infrastructure concerns in the wake of the closure of over 100 Mississippi bridges deemed unsafe by federal authorities, the stance of some of those same state officials on collecting Internet sales taxes seems particularly relevant.
Gov. Phil Bryant took the step of an emergency declaration to close the bridges, but state and county officials have known about the deteriorating bridges for a long time. Some state elected officials, including both executive and legislative branch, have flatly refused to consider any solution to the poor state of Mississippi’s roads and bridges that can be labeled a tax increase.
Possible revenue sources that have been rejected include a hike in the state’s gas tax, increases in vehicle registration fees, and other general hikes in the cost of road and bridge use.
Last adjusted in 1987, Mississippi’s 18.4 cents per gallon state gas tax (CPG) is a flat tax. Whether gas is $1 a gallon or $5 a gallon, the state gas tax is still 18.4 CPG.
The only way the state takes in more revenue in gas taxes is for the volume of gas consumed to increase — and improvements in fuel efficiency and consumer behavior in buying more fuel efficient cars have made that difficult if not impossible to realize. The fact is that Mississippi’s gas tax isn’t keeping pace with the inflation of rising highway construction and maintenance costs.
A 2012 national report found that Mississippi has an estimated $30 billion in highway and bridge needs between 2008 and 2035 but that the state’s current gas tax structure would only generate $15.3 billion to meet those expenses.
But one thing is certain — one segment of the state’s tax revenue stream that has been endangered by changing technologies could be fixed not with a new tax, but with full collection of an existing tax that has been on the books continuously since 1932 — sales tax.
We pay sales tax as a matter of course in bricks-and-mortar stores in Mississippi, but state lawmakers have by and large been unwilling to level the playing field for Mississippi mom-and-pop retailers by allow out-of-state online retailers to avoid collecting those same taxes in our state.
Lt. Gov. Tate Reeves has been the most consistent opponent of Internet sales and use tax law changes in Mississippi. Reeves in 2017 shut down a House effort to impose full collection of the state’s existing sales tax. The House passed a bill on a 76-41 vote that would have required out of state businesses with more than $250,000 in sales but no physical presence or “nexus” in Mississippi to collect and remit sales taxes from Mississippi customers.
In explaining state Senate opposition to the House bill, Reeves said: “Frankly, we believe the bill is unconstitutional. I have yet to hear from one lawyer who thinks otherwise, including many of the House members who voted for this bill. They would tell you the most likely scenario is that if this were to pass, it simply put Mississippi in litigation along with Alabama and other states.”
Reeves cited the 1992 Quill case in North Dakota as the basis of his opposition. In that ruling, the high court held that states generally could not collect sales taxes from a seller that did not have a physical presence or “nexus” in that state.
After more than 25 years kicking the can down the road on the issue, the U.S. Supreme Court is now poised to bring some clarity to the issue this summer. South Dakota and 35 other states have asked the high court to in the current South Dakota v. Wayfair to declare that the “nexus” or “physical presence” rule established in 1992 in Quill is outdated and punitive to bricks-and-mortar retailers at a time when Americans are increasingly doing their shopping online.
Without the Quill case to give them political cover, a Wayfair case decision that eliminates the “physical presence” obstacle to full collection of online sales taxes will leave state Republican leaders hard pressed to continue to avoid letting 2018 technologies finally catch up with a 1932 Mississippi tax initiative.
Infrastructure and old bridges are just a few issues that this “no new tax” revenue source could fund that desperately need attention in our state.
Sid Salter is a syndicated columnist. Contact him at email@example.com.