House OKs bills taxing online marketplace facilitators Amazon, Etsy
Lansing — Online business facilitators such as Amazon, eBay and Etsy could start paying state sales and use taxes under legislation the Michigan House approved unanimously Wednesday.
The four-bill package would codify sales and use taxes currently levied on out-of-state retailers and extend those taxes to marketplaces selling third party products. The taxes would generate millions of dollars more in taxes annually and, supporters said, create an even playing field for Michigan brick-and-mortar stores already subject to state taxes.
The legislation is a matter of “tax fairness,” said Rep. Lynn Afendoulis, R-Grand Rapids Township, a sponsor of the bills.
And “its additional revenue to the state without raising any taxes,” she said.
The legislation further puts into practice the 2018 Wayfair decision, a U.S. Supreme Court ruling that allowed states to collect sales and use taxes from out-of-state retailers who sold to Michigan customers.
After the decision, the state Treasury Department issued rules effective October 2018 imposing the sales and use tax on out-of-state or remote sellers, but stopped short of imposing the taxes on marketplace facilitators.
The Treasury Department has since collected about $140 million from the new tax capture and is on track to hit $160 million in the first full year of implementation, said Eric Bussis, chief economist for the Department of Treasury. The tax is expected to bring in $225 million this fiscal year and $240 million next year.
If implemented by Jan. 1, 2020, the state expects the sales and use tax imposed on marketplace facilitators to bring in an additional $60 million in the remaining months of fiscal year 2020 and $96 million in fiscal year 2021, Bussis said.
Of the sales tax collected, 73% goes toward the School Aid Fund, 10% to state revenue sharing for communities and the rest is dumped into the General Fund.
The legislation would only apply to out-of-state businesses and facilitators whose sales exceeded $100,000 in the prior calendar year or if the seller had more than 200 separate transactions in the state the previous year.
Marketplace sellers who already pay sales or use tax in Michigan would not be taxed a second time to sell through a facilitator, Bussis said.
“The tax would be imposed one time,” he said. “There are probably large independent sellers on some of these sites that already have to remit.”
Hotel room sales by the hotel itself and telecommunications sales would be exempt from the laws, according to an analysis from the House Fiscal Agency.
Telecommunications companies already remit sales taxes on services as well as other taxes such as 911 fees on cell phones, said Rep. Jim Lilly, R-Park Township.
“Because these tax collection mechanisms are already working it really doesn’t make sense to sort of try and reinvent that wheel,” Lilly said.