City Council

\31 RESOLUTION REAFFIRMING THE CITY OF OKLAHOMA CITY'S ADOPTED POSITION OF SUPPORT FOR FEDERAL PASSAGE OF MAIN STREET FAIRNESS LEGISLATION TO ADDRESS THE COLLECTION OF SALES TAX FOR ONLINE PURCHASES. WHEREAS, the constitution of the State of Oklahoma prohibits municipalities from using ad valorem taxes for operations, and thus most Oklahoma municipalities receive a majority of operating revenue from sales tax collected by brick a4d mortar businesses, from online vendors with a nexus in the state and from use tax as collected by the Oklahoma Tax Commission on purchases made online through vendors without a brick and mortar location in the state; and WHEREAS, remittance of use tax not collected by the vendor from online purchases puts an undue burden and widely unknown obligation on consumers; dnd WHEREAS, the state of Oklahoma has taken all necessary steps in preparation for collection of online sales tax by making remittance of sales tax as simple as possible for online vendors; and WHEREAS, out-dated standards of attributing physical presence to determine a retailer's nexus to a particular state in such a way as to extend that state's jurisdiction to enforce its tax laws under the Commerce and Due Process Clauses of the United States Constitution no longer serve to accurately measure the economic activity of the modern internet-connected marketplace available to every Oklahoman with an internet connection whether on their phone, tablet, or at home or business; and WHEREAS, the traditional legal measures of physical presence create an unlevel playing field between internet-based retailers and Oklahoma City-based retailers, who are rooted and invested in the community; and WHEREAS, those measures are imposed by law and not the econornics of a changing marketplace, and serve to artificially starve local economies of precious resources for providing services such as schools, public safety, and infrastructure; and WHEREAS, the City of Oklahoma City is currently losing $15-18 million annually as a result of uncollected online sales tax which could be used to place 100-150 police or firefighters in the community; and WHEREAS, Oklahoma City's local brick and mortar retailers serve as a foundation of our economy and are permanent, engaged members of the community who employ our citizens, support neighborhood charities and organizations, and contribute to the tapestry of the city. NOW THBREFORE, BE IT RESOLVBD, that the City of Oklahoma City supports leveling the playing field between traditional brick and mortar retailers and internet-based retailers by calling upon our congressional delegation to support federal legislation to give states the authority to collect sales tax on all internet transactions. APPROVED by the Council of The City of Oklahoma City and SIGNED by the August Mayor this 3oth day of 20Ll MAYOR ATTEST: THE CITY CLERK ilillll REVIEWED as to form and legality Municip ounselor Council Agenda MEMORANDUM Item No. X.A. 8130120n The City of OKLAHOMA CITY TO: Mayor and City Council FROM: Councilmembers Salyer and Ryan Resolution reaffirming The City of Oklahoma City's adopted position of support for federal passage of Main Street Fairness legislation to address the collection of sales tax for online purchases. Councilmembers Salyer and Ryan Background Councilwoman Salyer, Ward 6, and Councilman Ryan, Ward 8, requested a Resolution be prepared reaffirming the City's position of support for federal passage of Main Street Fairness legislation related to collection of sales tax for online purchases. Oklahoma City, like all cities in Oklahoma, relies heavily on sales tax to support operations. As technology advances and internet shopping becomes more prevalent, the City is losing an estimated $15-18 million annually to electronic vendors and internet sales. The Streamlined Sales and Use Tax project has been in process for several years and has resulted in the Main Street Fairness Act, which was recently introduced in the United States Congress. ln 1992, a Supreme Court ruling came out in the case Quill Corporation v. North Dakota, 204 U.S. 298 (1992) which stated that aretailer with no physical presence cannot be required to collect and remit sales taxes. This ruling was made when the internet was in its infancy. Today, online commerce has advanced to the extent that an estimated ljYo of all purchases are made electronically, and this percentage continues to grow. The Quill ruling offered a remedy to the unequal treatment of online and brick and mortar retailers. Congress could provide a single solution that would apply to retailers across the country. For the past l0 years a group has been working to create a nationwide agreement to simplify the administration of sales taxes. They have created the Sffeamlined Sales and Use Tax Agreement (SSUTA) and to date,24 states have signed on to the agreement. The provisions of the SSUTA require centralized collection and consistent definitions in each state to streamline administration of the taxes and simpli$, the collection process for vendors. Some online retailers have begun to collect and remit sales taxes in those states that are participating in the SSUTA. However, several online retailers have fought efforts to level the playing field and address the competitive disadvantage of brick and moftar businesses. The current situation creates an unfair advantage over our local businesses as their profit margin is lowered by the price differential created by electronic businesses who will not collect and remit state and local taxes. For several years Oklahoma City has been active in supporting a federal bill to address the issue of leveling the playing field for retail businesses that have a presence in our city and those who conduct businesses via the internet. The resolution submitted for consideration reaffirms this position and seeks to gamer additional supporl from the City's federal Iegislative delegation for this issue. Review City Manager's Office Recommendation: Resolution be adopted. Attachment