Now more than ever, Hawai‘i should join the 24 other states that are part of the voluntary Streamlined Sales Tax Project.
By failing to collect a sales tax from residents who make purchases online from companies outside Hawai‘i, the state is letting tens of millions of dollars — if not hundreds of millions — slip through its fingers.
This lost revenue could go a long way toward closing a more than $1 billion budget shortfall over the next two years while helping to level the playing field between brick-and-mortar stores and Internet-only businesses.
Some studies estimate that the amount states lose annually in uncollected sales tax could reach as much as $23 billion by 2012, according to the SSTP website.
We don’t want to see the alternative come into play, which is having the Amazon.coms of the world collect personal information and forward it to the respective states so their tax departments can go after the individuals. This would invade consumers’ privacy and add to government inefficiency.
What we would like to see is Hawai‘i and online retailers join this voluntary program while Congress works on a law that gives states the power to require collection.
As the SSTP website states, “Now that these states have made tax collection simple and easy for retailers, Congress can adopt legislation that applies to the products and services sold by remote sellers.”
A federal solution is necessary because local stores operate at a competitive disadvantage with remote sellers who don’t collect or pay taxes, the SSTP site states. These businesses, like Lihu‘e’s now-bankrupt Borders Books and Music, find themselves serving as showrooms for Internet and catalog sellers. As the SSTP puts it, prospective customers check out the merchandise locally but buy the product online or through a catalog to avoid paying sales tax. Local merchants are at a competitive price disadvantage simply because remote sellers do not collect sales tax.
We need to help our local companies stay in business while giving the state a means to recoup lost revenue, which ideally could lower our property tax burden dollar for dollar. This initiative, working its way through the Hawai‘i Legislature, is as good for the private sector as it is for the public.
Hopefully, if consumers see the sales tax while shopping online they’ll remember that they’re choosing to give away their hard-earned dollars to an out-of-state vendor that is not creating jobs locally or directly contributing to the well-being of the community. Maybe then we’ll see habits change and the “buy local” concept more fully embraced.
