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Haslam: Fed Gov’t ‘Enabling’ Evasion of Taxes Due to State

by Editorial Staff on July 27, 2012

Gov. Bill Haslam insists a federal plan requiring online merchants to collect sales taxes is the way to go, despite it meaning online shoppers would be forced to cough up more money for government to spend.

Fresh from testifying before Congress in favor of such a plan, Haslam told reporters Wednesday the current system is “enabling people to get around the law.”

“The tax is already due. There’s no question,” he told reporters in Dickson. “I think the basic thing is an issue of fairness. If you’re a hardware store out here on Main Street or a business of any type, you’re competing with people on the Internet who don’t have to collect the sales tax. I just don’t think that’s right.”

Haslam wrestled with this concept last year during negotiations with Amazon, an online retailer that ultimately agreed to open four warehouses in Tennessee in exchange for not collecting sales taxes from Tennessee customers until 2014 unless the federal government requires it earlier.

The issue sparked division among state lawmakers. Some argued the online retailer should have been forced to begin collecting sales taxes immediately, just like brick-and-mortar retailers. Others said the requirement would have constituted a tax increase on average Tennesseans.

However, lawmakers agreed to the deal and rewrote provisions into state law to codify the plan.

Haslam’s interpretation of what does or does not constitute a tax increase isn’t universally accepted among Tennessee conservatives. blogger David Oatney took Haslam to task on the issue this week, saying that, regardless of how the governor prefers spinning it, as far as consumers are concerned, “Going from not being taxed to being taxed is a tax increase-period!”

According to Oatney:

The Governor can phrase this however he wants, but this legislation both increases taxes and cripples competition. What the Governor is calling “leveling the playing field” is really “forcing out-of-State businesses who do mail-order business to collect other States’ sales taxes for them.” It is designed to favor so-called brick-and-mortar retailers in their competitive business battle against internet businesses that have advanced into the 21st Century. If the situation involved other means of business and trade, some of these same people would be crying that this legislation was government “protectionism.” The double-standard in this situation reeks and is politically foul-smelling.

Haslam, who was representing the National Governors Association in Washington, told the U.S. House Judiciary Committee that Tennessee was losing out on an estimated $400 million annually in sales tax revenue.

The future of any federal legislation is uncertain. There are three proposals circulating the nation’s capitol, and neither party wants to let the other claim victory on getting a measure passed.

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