States given the green light to begin collecting some $13 billion in sales taxes that go uncollected each year.
FOR YEARS, online retailers have been able to sell their products without having to collect state taxes—giving them an obvious economic advantage over brick-and-mortar retailers. But those days may be coming to an end.
In November, the U.S. Supreme Court gave states a green light to collect taxes on online sales, clearing the way for states to begin collecting some $13 billion in sales taxes that go uncollected each year on Internet purchases.
In 2008, New York passed a law requiring sales tax collection by online retailers that use New York-based affiliates, which are companies whose websites link shoppers to online retailers. By declining to hear the case, the high court left intact a New York appeals court ruling that companies like Amazon must collect state sales tax. Several other states, including California, Colorado, Connecticut, Illinois, Minnesota and Rhode Island, have passed similar laws.
“For decades, online retailers have relied on a 1992 Supreme Court ruling to avoid sales-tax collection in states where they have no physical presence,” an editorial in the New York Times says. “That has given them an unfair advantage over brick-and-mortar retailers and has deprived states of billions of dollars of sales tax revenue.”
States without a law requiring online retailers to collect taxes “would be wise to follow New York’s model,” the editorial says.
A resolution adopted by the AFT in 2010 noted that online retail sales are forecasted to reach nearly $249 billion by 2014. The resolution, titled “Support the Main Street Fairness Act,” points out that online sellers can “escape the sales and use tax collection obligations that Main Street ‘brick-and-mortar’ counterparts are subject to.”
“When one type of seller has to collect a tax and the other doesn’t, it creates an unfair advantage,” the resolution says.
The 2010 resolution called for the union to “promote congressional action to grant states the authority to collect this important source of revenue and take the burden off the consumers who are ultimately responsible for paying their own sales and use tax.”
“Sales taxes not collected on online sales are never collected and contribute to state and local government budget deficits,” the resolution notes.
Public Employee Advocate, Spring 2014