Tens of millions of Americans strolled through a virtual shopping mall this week, joining the growing tradition of Cyber Monday - a Black Friday for online retailers. As they made holiday purchases, state and local governments lost millions of dollars in revenue because most states have no so-called Amazon tax, named for the major online retailer, for those transactions.
A bill is under consideration in Congress would allow states to collect taxes on online purchases -- and nine states have already instituted one of their own -- but for now, many of those transactions go untaxed while state coffers remain undernourished.
Newspapers nationwide encouraged policymakers to adopt the Amazon tax. Some pleaded on behalf of the small local brick-and-mortar businesses that they say are hurt by the absence of such a tax.
The Tuscaloosa News in Alabama framed the issue as an uneven playing field between brick-and-mortar stores and their online competitors, a discrepancy that also has an impact on public institutions. "Most sales tax receipts are earmarked for public schools," the News reminded its readers in a Nov. 25 editorial. The newspaper voiced its support for a bill currently working its way through the U.S. Congress, providing a mechanism for the federal government to regulate the collection of sales taxes on online purchases.
"This isn't a tax increase," the News asserted. "In this tough economy, it may help struggling local merchants hold on, and it may encourage more investment in retail development as the city rebuilds from the April tornado."
On the Gulf coast in Florida, the Sarasota Herald-Tribune wrote on Nov. 27 that the current system that allows online sales to go untaxed is "not equitable, predictable or efficient" -- everything good tax policy should be. The newspaper recently reported that an Amazon tax would be a "key issue" during the 2012 legislative session. According to the Herald-Tribune, Florida's 6 percent sales tax generates 73 percent of the general fund revenue for the state. Sarasota County imposes another 1 percent sales tax of its own. The newspaper informed its readers that Florida has a rarely enforced "use tax" intended to be essentially a sales tax on purchases made out-of-state, including online transactions.
"It is a citizen's responsibility to comply with Florida law," the Herald-Tribune concluded, before providing information on how residents can submit their use tax to the Department of Revenue.
Writing on Cyber Monday, Nov. 28, USA Today said online retailer such as Amazon "deserve to thrive -- they often offer variety and prices unavailable at local stores -- but why shouldn't they compete on a level playing field when it comes to taxes?" Physical stores that create jobs in local communities are put at a disadvantage when online stores have an automatic price discount because of an absent sales tax, the newspaper argued. USA Today cited William Fox, director of the Center for Business and Economic Research at the University of Tennessee, who has concluded that state and local governments lose as much as $11.4 billion annually from untaxed virtual purchases.
"As unappealing as sales taxes feel today, there's no good reason to keep giving online retailers a break," USA Today concluded.
Julie Coons, president and CEO of the Electronic Retailing Association, was given an opportunity to argue the opposite position in USA Today's opinion section on Monday. She said that the frustrations of state and local public officials over lost revenue "is an insufficient reason to impose unreasonable burdens on interstate commerce." She pointed to other analysis that showed the expectations of potential revenue from an online sales tax might be "wildly optimistic." Coons also argued that small businesses are also given an advantage when they sell their products online.
"A new and misguided tax will devastate businesses working to survive in these harsh economic times," she argued. "Massive cost increases would result, and new regulatory burdens would significantly damage e-commerce and the consumers who rely on it."
In a guest editorial for the Green Bay Press-Gazette on Nov. 27, Matthew Gardner, executive director of the Institute on Taxation and Economic Policy, pointed to projections from the National Retail Federation that as much as 36 percent of purchases will be made online.
Gardner connected the lack of tax collection on those sales to a 1992 Supreme Court decision that ruled states couldn't impose a sales tax if a retailer didn't have a physical presence in the state -- a point of contention when Amazon tax legislation has been proposed. But because of the "technological changes" that have followed the court's decision, the ruling has become outdated, Gardner argued, and the time for reforms such as those being considered by Congress has come.
"More tax-free sales mean fewer tax dollars states can spend plowing the winter snow or helping seniors pay their heating bills," Gardner said. "Not to mention the consumer dollars that won't circulate in our local economies because the current system rewards online shopping with out-of-state businesses."