By Jonathan Johnson, Chairman of the Board of Overstock.com
Utah’s Gov. Gary Herbert and other internet tax proponents proclaim Utah’s uncollected e-commerce sales tax has reached $200 million a year. It’s a large number. And it’s largely wrong.
Supposedly, the shortfall results from out-of-state e-commerce retailers not collecting Utah sales taxes. But is $200 million the number right? It doesn’t seem to add up.
Here’s a back-of-the-envelope calculation of all 2016 e-commerce sales taxes due in Utah:
• The 2016 total U.S. retail e-commerce is $392 billion (estimates from Internet Retailer and eMarketer).
• Utah’s e-commerce visit share is 0.84 percent, based on the assumption e-commerce sales are proportionate to visits (Source: Hitwise and Connexity); coincidentally, that figure approximates Utah’s population proportion of about 0.9 percent.
• The average Utah sales tax rate is 6.53 percent (https://www.salestaxhandbook.com/utah).
• Therefore, Utah’s total e-commerce sales tax due — collected or not — would be $215 million: ($392 billion x .0084) x 0.0653 = $215 million.
If this calculation is correct, then either Utah is not collecting more than 90 percent of its e-commerce sales taxes, or the governor’s $200 million figure is wrong