Faced with budget shortfalls, state governments will be looking at different ways to increase sales and use tax revenue, according to the white paper "The Impact of the Loss of State Sales and Use Tax Revenue", which was recently released by CCH, a provider of tax, accounting, and audit information, software, and services. Methods for increasing sales and use tax revenue will run the gambit from sales tax increases to e-fairness legislation, depending on the state, the report noted.
"This report makes it abundantly clear how significant the issue of e-fairness is and how it is imperative that we urge states to act now," said Oren Teicher, ABA CEO. "As online shopping grows, states will suffer increasing sales tax revenue declines and larger budget shortfalls as significant remote retailers eschew their legal obligation to collect and remit sales tax. We continue to believe that a simple, direct solution is the equitable enforcement of existing sales tax laws."
Based on current law, Teicher continued, remote retailers with either a physical presence in a state (such as shipping facilities) or affiliates in the state are obligated to collect and remit sales tax, but in most states, they do not. And while states such as New York, North Carolina, and Rhode Island, have updated their sales tax laws, "most states are still allowing hundreds of millions of dollars in lost sales tax revenue to go uncollected."
While CCH's white paper does not endorse any particular method for increasing sales tax revenue, it does articulate the "depth of the situation that most states find themselves in, both presently, and for the foreseeable future." It also examines the myriad ways that states will likely deal with these financial woes.
According to the Nelson A. Rockefeller Institute of Government's October 2009 State Revenue Report, sales tax revenue suffered a 9.5 percent decline for second quarter 2009, the report noted. Of the 45 states that have sales tax, 42 had declines during the second quarter of 2009, and 14 of those states had double-digit declines. Wisconsin suffered the greatest decline, at 34.4 percent, followed by Arizona, at 27.3 percent.
The white paper noted that states have a number of options at their disposal to generate additional sales and use tax revenue, including beefing up tax collection staff, increasing tax rates, becoming a member of the Streamlined Sales and Use Tax Agreement, or following New York State's lead and passing e-fairness legislation.
The report also provides an overview of how some states are planning to combat the loss in sales tax revenue.
Among the states that have, or plan to, increase their sales tax rates are California, Maine, Massachusetts, Minnesota, Nevada, and Utah.
"For our member booksellers in these states, it is imperative that we get the word out that the first order of business in meeting the challenge of falling sales tax revenue is to equitably enforce existing sales tax laws," said Teicher.
The report also lists those states considering e-fairness legislation, and these include California, Connecticut, Florida, Illinois, Michigan, Tennessee, and Texas.
Booksellers looking to campaign for e-fairness in the aforementioned states are urged to contact ABA Public Policy Liaison David Grogan at (914) 373-6662 or via e-mail at firstname.lastname@example.org for assistance, tips, and information on advocating for e-fairness.