Sales Tax Revenue Crisis Remains a Hot Media Topic

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The issue of sales tax revenue declines has become a top priority for many states. Just this past week, there were a number of news articles and editorials about how states are looking to stave off these declines, as well as a report from California on how out-of-state online retailers' ability to sell items without collecting sales tax helped put one bookstore out of business.

In effort to recoup lost sales tax revenue, Colorado Gov. Bill Ritter wants the 2010 legislature to pass an e-fairness provision, and in Maine, a state legislator called for e-fairness to be a top priority.

Here's a closer look at these stories:

  • On Monday, December 21, the Bangor Daily News noted that, on Cyber Monday, Americans spent about $900 million shopping online. "Many of those sales should have been subject to sales taxes," the article noted, "but those taxes in many cases were never collected. With this Christmas season expected to set records for online sales, Maine is one of the states losing revenue."

    State Sen. Joe Perry (D-Bangor), co-chairman of the Maine Legislature's Taxation Committee, told the Bangor Daily News that estimates of sales tax revenue losses are significant, and that dealing with the issue should be a "top priority" of his committee. "This problem, a loss of revenue for the state, is just going to grow, and we need to address it," Perry said. "We understand the problems an Amazon faces with some 7,000 or so tax jurisdictions across the country, but they still should be collecting tax for the states."
  • On Sunday, December 20, the Denver Post reported that "by one estimate, Colorado lost $117 million last year from Internet purchases on which no sales tax was paid." As a result, Gov. Bill Ritter has called for a bill in the 2010 legislative session to tighten collection requirements for online sales.

    The Denver Post explained that "many retailers support such a provision because it would address" an unfair advantage held by online retailers. Christopher Howes, president of the Colorado Retail Council, told the Post, "By circumventing sales-tax collection on purchases, online merchants are able to undercut the total price of identical products and profit through an unfair advantage over local brick-and-mortar retailers."
  • In an editorial, "Stop 'legal' cheating," the Palm Beach Post noted how almost 70 percent of the state's recurring revenue is derived from sales tax. Florida is currently faced with a $2.5 billion budget gap for next year, and, according to the Bureau of Economic and Business Research at the University of Florida, state and local governments missed out on between $1.5 billion and $2.35 billion in 2008.

    Stressing that "legally, buyers in Florida owe sales tax on all purchases," the Post stated, "For several years, the Florida Retail Federation and Florida TaxWatch have urged the Legislature and the Constitution Revision Commission to get Florida more involved in the effort to crack down on what amounts to massive tax cheating. They will try again in 2010, and this time they must succeed.

    "One knee-jerk objection among some legislators and by Gov. Crist has been that the change would represent a 'new' tax. As noted, however, the tax exists. The new part would be collecting it."

    The Palm Beach Post editorial continued: "Online retailers and eBay have their well-connected lobbyists in Tallahassee. Shouldn't Florida and Florida taxpaying companies matter more to the Florida Legislature?"
  • In its Saturday, December 19, editorial, "The Web gets a pass: Online shoppers should pay the same sales tax, the Pittsburgh Post-Gazette noted, "While legislators tried to plug a deficit that came with the dour economy, $300 million in sales taxes on Internet purchases go uncollected annually," according to the state Department of Revenue." The newspaper called for a national solution to e-fairness and said, "The reason Internet sales taxes go uncollected is another absurdity....

    "That may have made sense prior to the Internet age, but it does not reflect the reality of commerce today. The Internet is everywhere -- that is the whole point. It is its own nexus. To heap absurdity upon absurdity, a retail Internet company can have warehouses in a state if it is owned by a subsidiary, which is what does in Pennsylvania."
  • In California, the Los Angeles Daily News reported that the Valley Book and Bible Store in Van Nuys will close on Christmas Eve after 57 years in business. Bookstore president David Wilke told the Daily News that business had not been good since "the Internet and slowly began chipping away at their profits in the early 2000s. And it's only been getting worse."

    Co-owner Heather Wilke told the News, "We can no longer compete with Amazon's no sales tax or shipping cost advantage." Wilke added: "The most stressful thing is having to tell our oldest customers we're closing."

Read more about recent media coverage of the e-fairness issue in BTW's December 9 roundup. --David Grogan