Online shopping sales tax starts October 1

LANSING, MI (WLNS) – Shopping online is as easy as clicking your mouse, but for years the sales tax online has been nonexistent.

It’s something Michigan retailers say gives online stores an unfair advantage over local stores who have to add 6 percent at checkout.

“If anything you’d want the advantage to be to the home team not for the out of state companies,” said Tom Scott, Sr. Vice President, Michigan Retailers Association.

But retailers say a new law; the “Main Street Fairness Act” is leveling the playing field.

The new law requires any company that operates in Michigan, in store or online, to pay the sales tax too, including online giants like Amazon and Overstock.com.

“It’s really good for the brick and mortar retailers, the ones who have been at a competitive disadvantage all of these years because they collect the 6 percent sales tax while their out of state online competitors have not been,” said Charles Ballard, MSU Economist.

“We’re really happy about bringing about some level of the playing field right now and we still have the goal of everything, but this would be a huge step forward,” said Tom Scott. Sr. Vice President, Michigan Retailers Association.

Experts say the sales tax isn’t anything new, but the means of collecting it is.

Online shoppers in Michigan have always been required to pay that sales tax by self-reporting their online purchases on the income tax return. But the Department of Treasury found only 1.5 percent of people actually followed through with the payment, costing more than $500 million in uncollected tax revenue in Fiscal Year 2015.

With the law sales tax will be collected when you check out online, but until the law kicks in shoppers in Michigan are on the honor system.

The new collection starts Thursday, October 1.

The Michigan Department of Treasury estimates that not paying online sales tax up to this point, has left more than $500 million in tax revenue uncollected this year.

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