The irony of state policy on sales taxes

There is a good deal of irony in the governor's vow to veto a bill that would distribute the state sales tax differently, sending more of the tax money to counties based on population and less to counties based on point of sale. Gov. Pat McCrory accused the legislation of being more "tax and spend policies of the past" — a fourth-degree insult in Republican circles — that would "cripple the economic and trade centers" of the state.

The legislation would change the way the sales tax is distributed. Now, most of the revenue goes to the county where the money is spent. If approved, the new rule would distribute more of that revenue — but not all of it — to counties based on population. The result would be more tax revenue for struggling rural counties and somewhat less for metropolitan areas, where rural residents often go to shop. The Charlottes and Raleighs would lose revenue; the Griftons and Taylorsvilles would gain. Current distribution is skewed in favor of urban counties.

The irony is that North Carolina and many other states have campaigned for years to require online and direct-mail retailers to return sales taxes to — note this — the states where the buyer lives. North Carolina has been largely successful in this. Amazon, the 800-pound gorilla of online retail, now disburses sales taxes to North Carolina when N.C. residents make a purchase.

McCrory has supported this sales tax principle, that the buyer's residence should determine where the sales tax goes, and retailers should be required to charge sales tax for whatever state in which the buyer resides. With a hodge-podge of state and local sales taxes to keep track of, this requirement is a challenge to online retailers.

But when it comes to sales taxes charged by brick-and-mortar stores in North Carolina, McCrory is now saying the buyer's residence should not matter: the point of sale should determine where the sales tax money goes. This favors the large cities and urban counties and hurts the decaying rural counties, where downtowns are filled with vacant storefronts and failed businesses because they can't compete with the glitzy style and mind-numbing variety of shopping experiences in urban areas. The state accommodates this demolishing of rural businesses by building ever-more express highways from rural counties to urban centers, where rural residents now spend most of their money.

If the residence of the buyer is relevant to nationwide online retailing, it should be relevant to in-state retailing as well.