JACKSON – The voluntary collection of the 7 percent tax on retail items sold to Mississippians by Amazon and other online retailers is not providing the boost to the state general fund that many had hoped it would.
Instead of being a boost to the beleaguered state general fund, the use tax, like other state taxes, is underperforming in terms of collection. Through the month of May, the state’s use tax revenue is actually down – albeit only slightly – from the previous year by $901,491 or 0.44 percent.
When state Revenue Commissioner Herb Frierson confirmed in January his agency had reached agreement with online retail giant Amazon to collect the use tax, there was hope that it would mean a boon – at least a small one – for sluggish state revenue collections.
And use tax collections from March seemed to justify reasons for that hope. In March, the state collected $20 million in use tax – up 8.9 percent from the amount collected in March 2016.
But use tax collections have been sluggish in April and May. In May, the state collected $17.4 million in use tax, compared to $18.9 million in May 2016.
“Use Tax is difficult to predict because you don’t know when people/businesses are going to purchase and report taxable items,” said Kathy Waterbury, a spokeswoman for the Department of Revenue in an emailed response. “Looking back, we had a number of large payments in spring 2016 that didn’t repeat this year. In addition, we paid $2.8 million in use tax refunds in May 2017.”
Mississippi imposes a 7 percent sales tax on most retail items. Stores in Mississippi have the responsibility to collect the sales tax from the purchaser and remit the collections to the state.
The use tax in Mississippi is a 7 percent tax levied primarily on items that are purchased by Mississippians from out-of-state vendors, such as online or through catalogs.
A 1992 U.S. Supreme Court ruling prevents the state from requiring the collection of the tax by companies that do not have a brick and mortar presence in that state. As internet shopping activity continues to grow, numerous states are trying to force the courts to reconsider the earlier ruling.
And Amazon, the largest of the online retailers, is voluntarily collecting the tax in many states, including Mississippi.
Waterbury said through May, the state has garnered $36 million in use tax revenue collected voluntarily by 1,887 companies, including 21 collecting the tax for the first time this calendar year. Amazon is among those 21.
Current state law mandates that if the tax is not collected by the vendor, the purchaser is responsible for paying it. And in many instances, collecting the tax is not an issue, such as on car purchases made out of state or when businesses make major out-of-state purchases. In those instances, the Department of Revenue has little, if any, trouble collecting the tax.
But in regards to many online purchases made by individuals, the state depends on the purchaser voluntarily paying the state, and most agree that seldom occurs.
While Amazon is voluntarily collecting the tax, it appears that with Amazon’s purchase of supermarket chain Whole Foods, the company will be required to collect the use tax on their internet sales to Mississippians. Whole Foods has a location in Jackson, meaning with the completion of the purchase, Amazon will have a brick and mortar presence in the state.