Study Shows Sales Tax Inequity’s Impact on New Jersey

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Due to sales tax inequity, New Jersey lost $171 million in non-collected sales and use tax on business-to-consumer Internet purchases of goods and services from out-of-state vendors in 2009. Moreover, if the state were to clarify sales tax laws to require remote retailers with nexus in the state to collect and remit sales tax, it could add 1,442 in-state jobs annually.

These were just some of the key findings of the study “Estimates of New Jersey Sales and Use Tax Losses Resulting From E-Commerce,” which was commissioned by the New Jersey Retail Merchants Association (NJRMA) and conducted by the Rutgers University Edward J. Bloustein School of Planning and Public Policy.

The results of the study were announced by the New Jersey Retail Merchants Association at a press event on Thursday, September 29, in Trenton, New Jersey, attended by the New Jersey Alliance for Main Street Fairness and a number of retailers, including Harvey Finkel of Clinton Book Shop.

At the press conference, Finkel noted that consumers will browse his bookstore but then tell him they would rather buy online to save money, as reported by the Star-Ledger. “We’re just looking for fairness,” Finkel. “It brings less people into the store. It’s just not good for our communities.”

Among other key findings from the NJRMA study:

  • Without reforms to sales and use tax laws in New Jersey, non-collection will continue to worsen in the coming years because the state has one of the highest broadband connection rates in the country (72 percent). E-retail sales grew by 367 percent in New Jersey compared to 267 percent nationally between 2002 - 2010.
  • The potential rebound effect of closing the sales tax loophole for online-only out-of-state retailers could result in $393 million in sales returning to in-state retailers, adding 1,442 in-state jobs, $44 million in personal income, and $95 million in gross domestic product for the state annually.
  • The New Jersey Department of Treasury already, by implication of its 1040 filing instructions and use tax estimates, acknowledges $159 million in non-collected use tax in 2008. When factoring both business-to-business and business-to-consumer sales, non-collection of sales and use tax rises substantially to $608 million lost in 2009.

The American Booksellers Association, which is part of the New Jersey Alliance for Main Street Fairness coalition, is calling on member booksellers in New Jersey to reach out to their state lawmakers to urge them to sponsor legislation to clarify sales tax laws to close this loophole and level the playing field. To make this outreach easier, ABA has provided a template letter that booksellers can adapt and use to e-mail, fax, or call their lawmakers.

Booksellers that have questions regarding the issue of sales tax fairness are encouraged to contact ABA Senior Public Policy Analyst David Grogan at (914) 373-6662.