- Jul 10, 2007
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i think the party will be over within the next 3 years.
The e-tax man cometh.
As early as this week, Sen. Dick Durbin (D-Ill.) told The Post he will propose sweeping legislation to tax all online purchases -- in a move aimed at closing state budget shortfalls.
Such a tax would plow more than $1 billion in tax revenues into the state coffers for the 2012 budget, according to some estimates.
William Fox, University of Tennessee economics professor, says that based on his own estimates, New York lost about $865.5 million in tax revenues in 2010 -- almost enough to close that year's $1 billion budget deficit -- based on its 4 percent tax rate.
Sen Dick Durbin will put up a bill in Congress ending the tax-free status for Web purchases, since sales are now robust.
AFP/Getty Images
Sen Dick Durbin will put up a bill in Congress ending the tax-free status for Web purchases, since sales are now robust.
However, Fox acknowledges that a research report he helped author last year didn't appropriately factor the blistering pace of online sales growth over the past several years.
Fox estimates that the annual growth rate for online sales is actually about 14 percent from 2006 to present.
"We were intentionally more conservative in our earlier studies," he said, noting that the study factored a growth in e-commerce at a more modest 9.9 percent.
Some reports indicate that online sales hit a whopping $165 billion in 2010 -- an annual growth rate closer to 15 percent, which would put New York's tax receipts close to $1 billion.
Durbin's bill, dubbed the Main Street Fairness Act, is being portrayed as an end to the tax holiday that online shoppers on major Internet vendors like Amazon.com, Overstock.com and even Apple's App stores have been enjoying for years.
Online companies already pay state taxes in the states in which they reside, but many politicians, including those in New York, Illinois and Connecticut, recently have been pushing to collect taxes from customers on purchases made outside the state if the sites have vendors that physically reside within their states.
Durbin's proposal, which he plans to introduce as soon as tomorrow, intends to push Internet vendors to collect state taxes on items purchased out of state.
"Why should out-of-state companies that sell their products online have an unfair advantage over Main Street bricks and mortar businesses?" Durbin said in a statement.
For more than a decade, the burgeoning Internet sales market has enjoyed a Congressionally sponsored advantage via sales tax moratoriums, established in 1998, to foster growth in the digital sales business.
But with e-commerce vendors like Amazon no longer fledgling entities and states and cities like New York and Illinois facing budget deficits, e-commerce taxes have become a hot-button issue.
Professor Fox says that for states it's not just the busted state vaults that are at issue; letting digital vendors slide on taxes is also a big drain on the job market.
"If an online tax standard is established, it's a winner for our country. It's that simple," Fox said.
Big Internet vendors, however, are not going to give up their advantages without a fight.
Amazon severed ties with online affiliates and fled to avoid taxes after Illinois Democratic Governor Pat Quinn created a law to tax purchases made online in the state at the same 6.25 percent rate as traditional bricks and mortar sales.
Amazon also has waged tax war in New York to avoid paying taxes at the state's nearly 4 percent rate. Amazon also recently closed its Texas operations after a squabble with lawmakers over taxing shipments.
The prickly issue is a complex one for many, and has created strange bedfellows, with some bricks and mortar businesses like Wal-Mart, BestBuy and Target lining up with proponents of an online tax.
That's even as those same companies expand their own traditional sales business into cyberspace in competition with the Amazons of the world.
It's unclear what sort of headwinds Durbin may face in trying to get the bill approved. As it stands, his current bill is the second iteration of an identical one last year that never made it to the floor for a vote.
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