Senate might log on to sales tax

It’s not surprising a group of lawmakers are considering legislation that would allow levying sales taxes on purchases made online.

What’s unusual is the legislators are U.S. senators, and not state senators.

Now, a state only may collect a sales tax on purchases made from a business which has a physical presence – a store, warehouse or distribution center – within the state. Many online sales are tax-free, which gives Internet retailers an economic advantage.

It is unclear whether the tax on online sales would be limited to the state rate or include sales taxes by county governments and/or transit authorities.

In Ohio, the 5.5 percent state sales tax is meant to be a tax on consumers. That is something anyone who has bought or sold a used vehicle should know. In fact, retailers in Ohio are prohibited from refunding all or part of the sales tax, or otherwise absorbing the tax required to be added to the sales price.

However, retailers are responsible for remitting the sales tax. According to the Ohio Department of Taxation:

Sales tax is a “trust” tax that is to be collected by all retailers and certain service providers when they make taxable retail sales. It is called a “trust” tax because the consumer has entrusted this tax to retailers and certain service providers with the understanding that it will be reported and paid to the State of Ohio in a timely manner.

Retailers even get a discount – three-quarters of 1 percent – for remitting the tax on time.

The U.S. Senate bill would be a boost to state revenues and be welcomed by businesses which now impose sales taxes. Online retailers, obviously, might not like it so much. They would agree the tax degrades at least slightly the buying power of a customer.

Ultimately, if Congress declines to act, it might be easier for Ohio to simply replace the sales tax with something called a purchases tax. Sure, businesses still would be required to collect the tax, but the name would be more accurate.