On Cyber Monday, states lose millions in sales tax

The News TribuneNovember 26, 2012 

If you’re like millions of other Americans, you’ll spend some time today hiding your computer screen from your boss. It’s not a good idea to be caught shopping on company time, after all.

Yes, today is Cyber Monday, one of the busiest online shopping days of the year. Shoppers will be searching for the bargains they weren’t willing to brave the Black Friday hordes to find. And many of them will be attracted to the lower prices online sellers are often able to offer because they don’t charge sales tax that brick-and-mortar stores must collect.

But when millions of Americans avoid sales taxes by getting their bargains online, they’re cheating their communities and states out of desperately needed tax revenue – revenue that pays for such things as roads, public safety, education and infrastructure.

It’s estimated that the 45 states that charge sales tax will lose out on $23 billion in uncollected sales tax this year due to online sales. Currently, online sellers have to charge sales tax only if they have a physical presence in the buyer’s home state – which is why Seattle-based Amazon.com will make you pay sales tax on that cookbook you’re ordering for Aunt Jane.

Washington state alone will lose an estimated $446 million in sales tax revenue next year. Unless something changes, those revenue losses are expected to double by 2020.

The problem is only worsening. Online sales in November and December are expected to be up 12 percent this year over 2011 – hitting $92 billion to $96 billion. Today’s sales alone are projected to be $1.25 billion.

States experiencing revenue losses – and brick-and-mortar merchants seeing their customers migrate to Internet sellers – have had enough. They’re been working for the last decade to get Congress to pass uniform federal legislation requiring online sellers to collect state sales taxes, but have had little success.

In the past, the most persuasive argument against a national sales tax policy for online sellers has been the technical difficulty in collecting taxes that vary widely from state to state. But computer technology has advanced to the point that that argument no longer holds water.

There appears to be a growing consensus in Congress that it’s time to act. Too many legislators are hearing from merchants back home that online sellers are hurting their businesses because they have an unfair, artificial price advantage.

That has to stop. Washington’s congressional delegation and state elected officials need to push for legislation that would level the playing field for online and brick-and-mortar businesses.

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