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October 24, 2011

Conflicted politics deter sales tax reform

CORSICANA , Texas — Byron Cook doesn't like the smell of taxes any more than his fellow Republican conservatives in the Texas Legislature. But he drew the line this summer on allowing millions of dollars in sales taxes to go uncollected.

Cook voted for a bill that requires online retailers like the electronic commerce giant Amazon to start collecting Texas sales taxes from their customers and remit the revenue to the state and local governments – just like bricks-and-mortar stores have always been obligated to do.

It was a polar opposite move to the tax-averse stance of conservative Republican lawmakers on the national stage, who view such legislation as a form of new taxation. But Cook and the GOP super-majority in the Texas Statehouse saw it as a fairness issue as well as a necessary measure to cope with the state’s $15 billion budget deficit.

At least eight other cash-strapped states this year have pushed similar bills to close a legal loophole that lets online retailers off the hook for sales tax collections unless they have a physical presence, such as a store, in the states where they do business.

Cyberspace doesn’t count. So Amazon, based in Seattle, doesn’t collect sales taxes in Texas or most other sales tax states, making their prices even more attractive to consumers there and putting traditional retailers at a disadvantage.

The common fear among sales tax states: A continued rapid rise of e-commerce and the associated reduction in sales tax revenues that pay for schools, police, parks, pensions and other basic public services.

“We're grappling with an issue that is extraordinarily important,” said Cook. “The way people make purchases is changing dramatically. If online retailers aren't made to collect the sales tax, we're talking about a revenue source that's going to disappear.”

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