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Is Solution to State Deficits Only a Mouse Click Away?
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Special to CNBC.com
With a number of states facing swelling budget deficits, what if there was an easy way for them to get billions of dollars in uncollected taxes?
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AP |
There is—in theory at least. That's why many states are continuing to push Congress to let them collect sales taxes on all online and catalog purchases. A bill is expected to be introduced this summer calling for such a move, though previous efforts have gone nowhere.
The group spearheading the drive, the National Conference of State Legislatures (NCSL), recently released a report showing that US states could eliminate 13 percent of their combined budget gaps if there was an online sales tax.
"[Such federal legislation] closes a tax avoidance loophole costing states about $23 billion," said Neal Osten, a spokesperson for the NCSL.
Right now, consumers do pay sales taxes online, but only if the retailer has a physical presence, or "nexus," in the state.
That means companies that exist only online—such as Amazon [AMZN
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That fact has caused opponents of an online sales tax to question whether such a significant amount of money could actually be raised by such a tax. But proponents of the law—including 23 states and the National Retail Federation trade group—aren't giving up.
"There's more and more money being lost or uncollected because the shopping patterns have shifted," said Maureen Riehl, vice president of the National Retail Federation's Government and Industry Relations Counsel. "The status quo is not acceptable to us anymore."
According to the NCSL, state governments that collect sales tax—totaling 46 states and the District of Columbia—will lose an estimated $8.6 billion in potential revenue this year, with the loss projected to rise to $23.26 billion in 2012.
Among the states is California, which could potentially recover nearly 9 percent of its projected $46.32 billion budget gap this year, the largest in the US by far, according to the data. Missouri and Arkansas could potentially cover their entire budget gaps—and still have money left over.
See slideshow about which states would benefit most from an online sales tax.
Various bills for a tax have been introduced over the past decade. Sen. Mike Enzi, R-Wyo., was set to introduce the latest version on Thursday, but decided to postpone until the summer to add a co-sponsor.
When introduced, Riehl said this version of the bill will smooth out various points of contention from its previous models—such as simplifying the definitions of taxable items; a stronger public perception that it isn't a new tax, but "collecting a tax that's already owed;" and a reimbursement plan that compensates retailers a fraction of the cost of collection, with more money going to smaller retailers.
"It's leveling the playing field for everybody," Riehl said. "Either everyone collects or no one collects."
But Forrester Research principal analyst Sucharita Mulpuru said the adoption of a federal bill still faces challenges, such as how to regulate the compliance of small sellers.
"It's a pretty complex problem to solve," she said. "There's a reason it hasn't been solved yet."
Data is a real-time snapshot *Data is delayed at least 15 minutes
