Michigan Governor Signs Bill Requiring Online Sales Tax Collection

Gov. Rick Snyder (R-Mich.) signed a bill Thursday requiring some online retailers to collect and remit sales taxes for Michigan residents' purchases, starting Oct. 1.

The two-bill package that passed last month is expected to generate $60 million more in tax revenue, but will only affect companies, like Amazon.com, that have warehouses, other businesses and advertisements in Michigan, according to The Detroit News. Without federal action, taxing purchases with e-tailers, like Overstock.com, cannot be enforced since they do not have a presence in the state.

Congress was unable to gain enough support for the Marketplace Fairness Act of 2013, which would require sellers with more than $1 million yearly profits to collect and remit sales tax regardless if they had a presence in the buyer's state, according to the bill. The U.S. Senate passed it in May 2013, but in November of last year, House Speaker John Boehner announced the bill would not pass the House.

"The speaker has made clear in the past he has significant concerns about the bill, and it won't move forward this year," Boehner's spokesperson said in November, according to CNBC. "The [House] judiciary committee continues to examine the measure and the broader issue."

The issue dates back to 1992 when the Supreme Court left the decision up to Congress, according to Yahoo! News.

In Quill Corp. v. Heitkamp, the Supreme Court found that states had a right under the Due Process Clause of the Constitution to collect sales taxes, but the burden placed on out-of-state businesses to collect the taxes ran afoul of the Commerce Clause.

“The State’s enforcement of the use tax against Quill places an unconstitutional burden on interstate commerce,” said Justice John Paul Stevens.

The Court then said that the “underlying issue here is one that Congress may be better qualified to resolve, and one that it has the ultimate power to resolve.”

Yahoo! News indicated the GOP-controlled House viewed the bill as a tax increase.

However, Snyder views it as tax collection. Some online retailers do include state sales taxes in purchases, but when they don't, taxpayers legally should remit unpaid sales taxes with their income taxes, according to The Detroit News. In 2013, 108,600 taxpayers did just that, paying $5.87 million in owed sales taxes. But those numbers do not include everyone. The Michigan Treasury Department estimates $289.4 million in Michigan sales tax from Internet purchases went uncollected in the 2014 fiscal year.

"What this is—is a collections issue," Snyder, who was an accountant before running for office, said. "There's taxes owed."