Groups to Ask for Sales Tax on Out-of-State Mail Purchases

Five groups representing state and local governments said Thursday that they have agreed to ask Congress to pass legislation allowing states, counties and cities to collect taxes on out-of-state mail order businesses.

The groups--the National League of Cities, the U.S. Mayors Conference, the National Assn. of Counties, the National Governors’ Assn. and the National Conference of State Legislatures--said the current ban on collecting such taxes costs them $3 billion in lost revenue annually.

In 1967, the Supreme Court struck down an Illinois law requiring out-of-state retailers, or mail order businesses, to collect a use tax on sales made to Illinois residents, arguing that “Congress alone has the power of regulation and control.”

“By establishing a mechanism for the collection of state and local sales taxes on sales by out-of-state retailers, the Congress would be enacting neither a new tax nor a tax increase,” the groups said in a statement calling for the new legislation.

But a spokesman for the Direct Marketing Assn., an organization of direct mail businesses, said the local government groups had been mislead, that the $3 billion in lost taxes is an exaggeration and that the elderly and those in rural areas would be hurt by the proposed law.

“Those hurt most by this proposed legislation,” said Robert Levering, “are those who don’t have the convenience of many of the major shopping malls one would find around the state’s capitals. These include the elderly, the disabled and rural Americans.”

He said the bill is opposed by groups such as the American Assn. of Retired Persons and Consumers Union.

Lack of Enforcement

But the government groups argued that the final purchaser of merchandise already has a legal obligation to pay sales or use taxes levied by state and local governments whether the purchase is made from local merchants or by mail order from out-of-state vendors.

The problem is the lack of a workable enforcement mechanism,” they said. “The existence of a workable enforcement mechanism would simply enable state and local governments to collect taxes due and provide a $3-billion infusion of revenues that could be used to address a whole range of needs in American communities,” the groups said.

Mayor Bob Bolen of Ft. Worth called the current situation “an expensive and unfair tax loophole used by the big-time mail order sales industry” and a gimmick that puts local merchants at an unfair competitive disadvantage.”

Bolen said mail order buying represents more than 15% of total sales volumes nationally and such purchases are climbing at a rapid rate.