President Donald Trump “feels strongly” that the U.S. should impose a sales tax on purchases made over the Internet, Treasury Secretary Steven Mnuchin said Thursday.
Mnuchin, speaking at a hearing before the House Ways and Means Committee, said he has spoken personally with Trump about the issue, and that the president “does feel strongly” that the tax should be applied.
The prospect of an online sales tax has been a long-standing point of contention between Internet-based retailers and their brick-and-mortar rivals. Trump has previously gone after Internet giant Amazon.com Inc., saying last year that it does “great damage to tax paying retailers.”
Amazon began collecting sales taxes on purchases in all states that levy them earlier last year, despite an exemption that allows online retailers to avoid collecting them in places where they don’t have a physical presence. But Amazon still avoids charging shoppers sales taxes when they buy from one of its third-party vendors — sales that make up about half the company’s volume.
Untaxed third-party sales might provide an advantage over brick-and-mortar retail chains, which have their own robust online operations but have to collect sales tax on all purchases in states where they have physical presences. Many large chains have stores in almost every state.
At the federal level, several bipartisan bills have been introduced to allow states to mandate collection of the taxes, with the most recent one re-introduced in 2017 and endorsed by Amazon. A previous bill passed the Senate.
Since a 1992 Supreme Court ruling established the precedent for exempting online retailers from sales taxes, various states have enacted “Amazon laws” to tax online sales the same way that brick-and-mortar sales are taxed. The Supreme Court ruling said states couldn’t require out-of-state retailers to collect sales taxes from consumers unless those retailers had a physical presence — through branches, warehouses or employees — where the consumers were located.
The court may revisit the issue in a case it is hearing this year in which South Dakota challenges the 1992 ruling.
Largely because of that ruling, which predated the rise of widespread online retailing, states miss out on up to $13 billion a year in sales taxes from online and catalog purchases, according to a 2017 study by the U.S. Government Accountability Office.