69%
think the current online sales tax process — where only companies that have physical presence in the Volunteer State must collect state taxes from residents – is WORKING
56%
say requiring them to pay tax on online purchases from out-of-state businesses would be a statewide TAX INCREASE
Summary
Tennesseans Not Buying New Online Sales Tax Regulations
Proposed New Rules Would Hurt Tennessee Businesses and Amounts to a State-Wide Tax Increase, NetChoice Survey Finds
Tennessee regulators are asking the legislature for new sales tax collection rules, but the clear majority of Tennesseans think that the current online sales tax collection process is working just fine, per a new NetChoice survey of Tennessee residents*. Further, many think the planned changes could have an adverse effect on Tennessee businesses.
More than 69 percent of Tennesseans think the current online sales tax process — where only companies that have physical presence in the Volunteer State must collect state taxes from residents – is working. However, Tennessee is slated join Alabama and South Dakota as the only states to require out-of-state sellers to collect sales tax – despite U.S. Supreme Court rulings that states may demand tax collection only from businesses that have a physical presence in the state.
“Tennessee tax collectors are poised to extend their taxing powers, leaving the state vulnerable to legal challenges, and exposing Tennessee-based businesses to retaliation from other states,” said Carl Szabo, policy counsel and a scheduled witness at Thursday’s Joint Government Operations Committee hearing.
“Ignoring federal doctrine by requiring out-of-state businesses to collect sales tax is a killer for small businesses and a losing cause in the courts.”
Only 21 percent of those surveyed were inclined to support Tennessee’s proposed new sales tax regulation. Moreover, 56 percent consider the new rule a statewide tax increase, and 46 percent think it will adversely affect Tennessee businesses.
Breaking with the remote sales tax rules established by the 1992 Supreme Court decision in Quill would require small businesses in Tennessee to track and collect sales tax for 12,000 jurisdictions across the country. Giving state tax authorities the power to regulate across state lines would cripple many small businesses –placing more power and market share in the hands of big-box retailers.
The NetChoice survey further revealed that 64 percent of Tennesseans fear the new rule would encourage other states to impose similar obligations. In addition, only 22 percent support laws and rules that allow tax authorities to audit out-of-state businesses.
About NetChoice
NetChoice is a trade association representing leading eCommerce businesses working to protect free enterprise and free expression on the Internet.
*The interactive survey of 400 Tennessee residents was conducted by Morar Consulting and has a margin of error of +/- 4%.
Graphs
Highlights
1) In recent years, there has been a debate about ways to collect more taxes for online purchases. Some have advocated for new laws to require merchants large and small to collect and pay taxes for all 46 states with sales taxes. Others point out that taxes are now paid on most online sales, the issue has largely solved itself and requiring small merchants to collect and send taxes to 46 states is burdensome and adds unreasonable compliance costs. What is your perspective?
There should be federal or state laws that require merchants large and small to collect and pay taxes to tax collection agencies in nearly every state. 25%
The issue has largely solved itself and requiring small merchants to collect and send taxes to 46 states is overly burdensome. 54%
Not sure. 21%
2) When it comes collecting sales tax on online purchases, it has been long held that states can only impose tax obligations on a business if it has a physical presence in the state. Tennessee’s Department of Revenue wants to change this practice with a new regulation that imposes sales tax obligations on businesses that have no physical presence in the state, but sell products to Tennessee citizens via catalogs or the Internet. If this bill passed and you had to start paying sales tax for online purchases from an out-of-state business, would you consider that a statewide tax increase?
Yes 56%
No 26%
Not Sure 19%
3) Are you more or less inclined to support this online sales tax legislation?
Yes 21%
No 60%
Not Sure 19%
4) Do you think enactment of this regulation in Tennessee would encourage other states to impose similar obligations on Tennessee businesses that sell to customers in other states?
Yes 64%
No 13%
Not Sure 23%
5) IF ANSWERED YES to 4: Do you think this will hurt Tennessee businesses?
Yes 46%
No 31%
Not Sure 23%
6) How do you think the current online sales tax process works?
It is fine, I like it as it is. 69%
It needs to change. More purchases should be taxed. 12%
Not Sure 20%
7) Do you support laws which would allow state tax authorities to audit businesses from other states?
Yes 22%
No 56%
Not sure 22%
8) Should all laws imposing Internet sales tax (federal, state, county or town level) exempt small Internet sellers from having to comply?
Yes 48%
No 31%
Not sure 21%
Methodology:
The interactive survey of 400 Tennessee residents was conducted by Morar Consulting and has a margin of error of +/- 4% in December 2016