Washington, DC – Today, the NetChoice Coalition released a new report on efforts to impose sales taxes on the Internet entitled “Sales Tax Simplification: Not So Fast — It’s Not That Simple.” The report analyzes the current debate including economic data and the efforts of the multi-state Simplified Sales Tax Program (SSTP) to simplify the current system of more than 7500 sales tax jurisdictions.
“The states pushing for Internet sales tax still have many hurdles left before they create a fair, workable system and potentially little reward for clearing them,” said report co-author and executive director of NetChoice, Steve DelBianco.
As the dot-com bubble burst, the US economy entered recession, and states faced huge revenue shortfalls, the debate over imposing sales taxes on remote Internet sales has quickly heated up. States forecast an aggregate revenue gap between $40 and $70 billion annually and they cite taxes lost to e-commerce as a primary reason. States add that remote catalogs and e-commerce are hurting “Main Street” retailers who are collecting sales tax on every purchase.
In reality, states will realize about ten percent of their oft-cited projections of uncollected sales taxes. At the same time, e-commerce has not had the anticipated devastating effect on “Main Street” retailers. Growth in e-commerce has cannibalized catalog and phone order sales, which have never been widely taxed nor pillaged the sales of Main Street.
In addition, the SSTP lacks the clarity necessary for tax fairness and favors tax collection authority over the interests of Web retailers and consumers. Ambiguity surrounding taxable goods, intra- and inter-state battles around participation in the Project, and the unresolved issues of business activity taxes all mean the SSTP’s real simplicity, fairness, and viability are far from certain.
The compliance costs of SSTP — especially for small firms — could well outweigh the probable benefits of taxing all remote purchases. States can recoup some lost revenue and help make-up budget shortfalls with more aggressive pursuit of multi-channel, multi-state retailers and greater use tax enforcement, without a federal mandate imposed on all inter-state retailers.
To learn more about the findings and to get a full copy of the report, contact Mark Blafkin at 202-331-2130 x104.