Case for Fairness

Reports and Studies

The following reports and studies look at the impact of uncollected sales tax revenue on states.

 

Laffer StudyPro-Growth Tax Reform and E-Fairness
This breakthrough study by Dr. Laffer and his co-author, Donna Arduin addresses the online sales tax loophole and how enacting policies to close it will jumpstart economic growth across the country. Overall, the study projects potential increases in Gross State Product (GSP) and state employment over the next decade based upon Internet sales tax revenues being wisely used to reduce the burden of other taxes in each state, leading to increases in state prosperity. Read More >

 

 

 

 

Metro EconomiesU.S. Metro Economies:  Impact of "Marketplace Fairness" on Select Jurisdictions - UPDATE
The Marketplace Fairness Act would allow state and local governments to enforce existing state and local sales and use tax laws on remote retailers so long as they simplify tax administration by adopting the Streamlined Sales and Use Tax Agreement (an agreement among twenty-four state governments which standardizes and simplifies administration across jurisdictions) or alternative minimum simplification requirements. It would also exempt small (less than $1 million in nationwide sales) remote sellers. The purpose of this research is to provide estimates of the sales tax revenue losses for E-commerce in 2011, 2012, and 2013, across US cities and counties in the absence of this Act. These estimates are presented in the accompanying tables. Read More >

 

Mass StudyThe Impact of the Internet Sales Tax Disparity on Massachusetts Tax Revenues, Sales and Jobs
The dramatic expansion of electronic commerce has fundamentally altered the landscape of the U.S. economy. Total ecommerce was $4.129 trillion in 2010, up almost 200 percent since 1999. Ecommerce accounted for 16 percent of the economic activity of manufacturing, wholesale, retail, and service businesses in 2010. Ninety percent of the $4.129 trillion was devoted to business-to-business (B-to-B) transactions. While sales to consumers expanded three times as rapidly as sales to businesses over the last decade, the $169 billion of business-to-consumer (B-to-C) ecommerce in 2010 was still only 4.1 percent of all ecommerce. A sizable portion of those electronic sales are subject to the sales tax. However, states cannot compel Internet and other remote sellers that do not have a physical Presence in the state—such as large national online retailers or mail order houses—to collect the tax. As a result, billions of dollars of sales tax revenues are lost, and bricks-and-mortar stores are put at an unfair competitive disadvantage. Read More >

 

IPP StudyInternet Sales and Use Tax Issue in MissouriThe amount of tax revenue lost due to untaxed interstate e-commerce is a growing concern for states throughout the United States. Research suggests that states, including Missouri, lose millions of dollars each year in e-commerce tax revenue because federal legislation prohibits them from collecting sales and use taxes from entities that do not have a physical presence in their given state. As a result, many states have considered, and some have adopted, policy options that may resolve this issue. Missouri has considered but has not acted upon proposals to permit the taxing of internet sales. This report expands on previous research to develop a unique formula to predict how much revenue Missouri forgoes due to e-commerce. Lastly, this report discusses alternatives for capturing the revenue if deemed appropriate by the Missouri legislature. Read More >

 

Estimates of Alabama LossesEstimates of Alabama Losses Due to E-Commerce
E-commerce or online sales by remote sellers to buyers in Alabama exceeded $34 billion in 2011. Most of those sales ($32 billion) were business-to-business (B2B) sales of products, 87 percent of which are exempt from use tax. On taxable B2B sales, the buyers or sellers are compliant (i.e., they pay the tax owed) 75 to 80 percent of the time. Retail online sales in 2011 totaled about $2.3 billion and most of those were subject to sales tax. However, on only about half of those purchases was the tax remitted. This report, by the University of Alabama at Birmingham, indicates that Alabama and its local governments in 2011 did not receive many millions of dollars of tax revenues that were owed as business-to-business (B2B) use taxes and business-to-consumer (B2C or retail) sales or use taxes. Read More >

 

Future Marketplace: Free and FairFuture Marketplace: Free and Fair
A free market provides buyers with the best terms and lowest prices. When that price reflects the actions of third parties, like government, the result is a distortion away from the efficient, free market price. Government actions that distort a free market include taxes, subsidies, and regulations that prefer one form of economic activity over another. This report explains how this distortion and its subsidy for out-of-state sellers has come to be and how the federal government keeps the loophole from being closed. It also reviews policy options for addressing it. These range from abandoning the general sales tax as unworkable in the 21st century to keeping it and using technology to simplify the complexity of complying with the sales tax laws of multiple states. Read More >

 

Economic Center AnalysisEconomic Analysis of Tax Revenue from E-Commerce in Ohio
We live in a time of dramatic economic change.  The most dramatic changes come from technological and social innovations and our responses to them.  The internet exemplifies this type of innovation. Its growth has given consumers new options for comparing and buying goods and services, and a new term has been coined for this field of business activity: e?commerce.  As with most innovations, e?commerce has created new challenges for public regulatory and tax policy.  Legal and practical considerations limit the ability of governments to collect taxes, particularly with the sales tax, which is administered and collected by state and local governments.  This issue becomes increasingly important as e?commerce captures a greater percentage of consumer purchases.  This study provides several insights about the impact that e-commerce is having on Ohio’s economy. Read More >

 

Michigan Sales TaxMichigan Sales Tax Collection and the Internet: A Need for Fairness
This analysis discusses the complex legal issues involving the collection and transmittal of state sales taxes by remote vendors. The major implication of this sales tax issue is an uneven playing field for a Michigan-based vendor and a remote vendor competing for the same purchase. When a consumer buys a taxable good from a Michigan-based retailer, the 6.0 percent state sales tax is collected. If that same consumer purchases the same item from a remote vendor, it is not a certainty that the 6.0 percent sales tax is collected and remitted. This uneven playing field reduces economic activity in the state and reduces the level of employment in the retail sector in Michigan. Read More >

 

RutgersEstimates of New Jersey Sales and Use Tax Losses Resulting from E-Commerce
This report presents the findings of Rutgers’ examination of the potential revenue losses incurred by the state of New Jersey as the result of non-collection of Sales and Use Taxes due on Internet-based commerce (E-commerce). The report, commissioned by the New Jersey Retail Merchants Association, describes three analytical approaches used to estimate the magnitude of these losses, and provides additional discussion of other potential economic impacts for the state of the transfer of retail activity from in-state businesses to out-of-state Internet-based vendors. Read More >