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Trade Associations Call on Governors to Ensure Sales Tax Equity
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Eleven independent trade groups joined this week to urge the governors in 44 states that collect sales tax to equitably enforce existing tax laws. The groups stressed that, given the budget shortfalls that most states are facing, now more than ever, it's a state's obligation to ensure sales tax equity by requiring out-of-state retailers with nexus in the state to collect and remit sales tax. As an example, the groups pointed to New York State's Internet Sales Tax provision, which became law on June 1 and is expected to garner $73 million in lost sales tax revenue for the cash-strapped state in fiscal year 2009.
"A state cannot allow out-of-state online retailers that have clear nexus -- through countless affiliates that act as sales agents in the state -- to skirt sales tax laws," said ABA COO Oren Teicher. "In the best of times, to undercut a state's independent businesses by selectively deciding what laws to enforce and what laws to ignore, is just plain wrong. In the current economic climate -- when many states are delaying projects, cutting important programs and services, and instituting hiring freezes as they work to plug massive deficits -- it's unconscionable."
In the letter to the 44 governors, the groups -- the American Booksellers Association, Alliance of Independent Media Stores, American Specialty Toy Retailing Association, Coalition of Independent Music Stores, Independent Dealers of Entertainment Association, Independent Florist Association, Independent Office Products & Furniture Dealers Association, Music for Everyone Association of Independent Music Centers, Music Monitor Network, National Bicycle Dealers Association, and United Servicers Association -- noted that the turbulent financial market, the chaotic economy, and slumping housing market have created a perfect storm that has resulted in a dramatic decrease in tax revenues for most states. At last count, 22 states are faced with ever-widening budget gaps and many more are eliminating jobs and services crucial to the well-being of their citizens, according to Stateline.org's 2008 Legislative Review.
Across the country, Stateline.org noted, many states have had to dip into rainy-day funds, delay projects, cut major programs, and put in place hiring freezes as they work to plug massive deficits. These deficits, it said, "[total] more than $40 billion in fiscal 2009 budgets that for all but four states began July 1. The shortfall was triple the $13 billion they weathered a year earlier."
In their letter to the governors, the trade groups noted: "Compounding matters, online shopping continues to grow at a faster rate than other retail sectors, meaning an increasing number of consumers are eschewing locally owned businesses for the tax-free shopping offered by out-of state online retailers and commercial resellers. As result, these already troubling budget shortfalls will only get worse if states continue unintentionally to subsidize out-of-state businesses by allowing remote merchants with nexus in the state to skirt existing tax laws, thereby letting millions of dollars in sales tax revenue go uncollected." (Read the full text of the letter.)
The trade groups are also calling on their member retailers in the 44 states to write, fax, or e-mail their governors to encourage the enforcement of existing sales tax laws.
To make this communication easier, ABA has prepared a template letter that can be adapted and sent. The association asks businesses that contact their governors to send a copy of the letter to ABA Public Policy Liaison David Grogan at [email protected]. --David Grogan
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Dear Governor: The turbulent financial market, the chaotic economy, and slumping housing market have created a perfect storm that has resulted in a dramatic decrease in tax revenues for most states. At last count, 22 states are faced with ever-widening budget gaps and many more are eliminating jobs and services crucial to the well-being of their citizens, according to Stateline.org's 2008 Legislative Review. Unfortunately, most financial analysts predict that there's a good chance the economy will weaken further before we see signs of recovery. As trade associations representing thousands of independent businesses in the state, we believe that, now more than ever, it's the state's obligation to ensure sales tax equity. We are urging you to enforce existing sales tax laws by requiring out-of-state retailers with nexus in the state to collect sales tax. Across the country, many states have had to dip into rainy-day funds, delay projects, cut major programs, and put in place hiring freezes as they work to plug massive deficits. Unfortunately, in most cases, even these drastic cuts haven't been enough to stem growing budget deficits. Stateline.org's Legislative Review reports that deficits total "more than $40 billion in fiscal 2009 budgets that for all but four states began July 1. The shortfall was triple the $13 billion they weathered a year earlier." Compounding matters, online shopping continues to grow at a faster rate than other retail sectors, meaning an increasing number of consumers are eschewing locally owned businesses for the tax-free shopping offered by out-of state online retailers and commercial resellers. As result, these already troubling budget shortfalls will only get worse if states like ours unintentionally continue to subsidize out-of-state businesses by allowing remote merchants with nexus in the state to skirt existing tax laws, thereby letting millions of dollars in sales tax revenue go uncollected. Faced with such grim financial forecasts, states around the country are seeking solutions. New York State provided one answer on June 1, when it began enforcing existing sales tax laws by requiring out-of-state retailers with nexus via affiliates acting as their sales agents in the state to collect and remit sales tax. In the five months since New York State's Internet Sales Tax provision became law, the state has recouped more than $20 million in lost sales tax revenue, and this figure is based on conservative estimates. By the end of the fiscal year, the state expects to collect some $50 million, and then $73 million in fiscal year 2009 - 2010. While this amount may not plug the state's budget deficit, it allows the state to continue some important programs without raising taxes. Governor, every analysis makes clear that locally owned businesses have far greater economic impact on their communities, contribute more to local charities, and are largely responsible for our villages, towns, and cities retaining their unique characteristics. To undercut them, by selectively deciding what laws to enforce and what laws to ignore, is simply wrong. Importantly, we are not discussing any new "Internet taxes." We are simply urging the state taxing authorities to look to New York's example and enforce the sales tax laws already in place. Thank you for your consideration. Sincerely, Avin Mark Domnitz, CEO Eric Levin Kathleen McHugh, CAE, President Don VanCleave Alan Millican, Chair Tom Carlson Chris Bates, President Johnny Thompson, Chair Michael Kurtz, President Fred Clements, Executive Director Dean Landers, President |