Mississippi is one of four states without a sales tax on third-party sales on the internet, but that could change if a bill that is headed to the Senate floor becomes law.
House Bill 379, known as the Mississippi Marketplace Facilitator Act, is sponsored by state Rep. Trey Lamar, R-Senatobia, and would require third-party sellers with sales of more than $250,000 — such as Amazon, Walmart and Etsy — to collect the state’s 7 percent use tax on purchases.
The Senate Finance Committee amended the bill and sent it to the Senate floor, where it could be considered as soon as next week. The other three states without a marketplace facilitator law are Florida, Kansas and Missouri.
HB 379 would allow the state to collect more revenue, as Amazon only collects use tax on items directly sold by it and not by marketplace affiliates, which account for almost half of its sales. If this bill becomes law, Amazon would collect and remit use tax on all purchases, even those by independent sellers.
State Sen. Chris McDaniel, R-Ellisville, said the bill would amount to a tax increase on consumers. Meg Bartlett, who is the associate commissioner of the Mississippi Department of Revenue, said that sellers already are legally obligated to remit use tax for purchases made by Mississippi residents.
“It was a tax due that was impossible to collect and the fallback position when we passed the bill (that authorized the DOR to collect use tax on online purchases) that this was a magical tax and if we supported it, it wouldn’t be a tax increase at all,” McDaniel said during the Senate Finance Committee meeting. “But the real-world implication was that it was a massive tax increase for the private sector.
“That’s what occurred and my concern is that we’re going to increase this burden on taxpayers and we’re doing this at the worst time imaginable, when we’ve got job losses across the board. It seems like the opposite approach to what we should be having."
The bill would also remove the third-party sellers from liability if the seller has provided them incorrect information.
The bill passed by a 106-13 margin in the House on February 25. Louisiana is the most recent state to have passed a similar law and its law will go into effect on January 1.
Online marketplaces perform three activities:
- They contract with sellers to facilitate the sale of a seller’s product through a marketplace.
- Engage in transmitting or communicating the offer or acceptance between consumer and sellers.
- Perform these services related to a seller’s products: payment processing, listing products for sale, taking orders, providing customer services and accepting (or assisting) with returns or exchanges.
Internet sales taxes became a fact of life after the U.S. Supreme Court’ s 2018 decision in South Dakota v. Wayfair Inc. allowed states to levy them on online sellers. Previously, online sales taxes were illegal for states to levy since a 1992 Supreme Court decision, Quill Corp. v. North Dakota, mandated the concept of a company having a physical nexus (a warehouse or an office) in a state in order for it to be subject to sales taxes.
The Wayfair decision rewrote that standard that to a virtual nexus and states passed new taxes and regulations to mine that revenue stream. Mississippi’s regulations required sales of $250,000 annually to be subject to the state’s use tax, which has been levied for decades on out of state sales.
Once the use tax was mandated for online sellers, both revenues and its percentage of the state’s total tax revenues have increased. In fiscal 2015, the Mississippi Department of Revenue collected $297 million or about 3.8 percent of the state’s total tax revenue.
In fiscal 2019, the state collected $420 million in use tax and that amounted to 5.02 percent of the state’s revenue haul.
In fiscal 2020 (which ends on June 30), the state has collected $290 million in use tax revenue so far, which adds up to 5.76 percent of all tax revenues collected by the DOR. While other tax revenues were down from the COVID-19 pandemic, use tax receipts are up more than $3 million as compared to the same time last year.