Study: States, local government to lose over $12B in revenue by 2012

New York City A new study released on Tuesday by the University of Tennessee finds that state and local government sales-tax revenue is expected to fall by as much as $12 billion by 2012 due to their inability to collect sales tax on Internet purchases.

With government revenues already in decline due to the economic downturn, the International Council of Shopping Center is calling on Congress to enact legislation allowing states to collect these necessary revenues and level the playing field between online and brick-and-mortar retailers as it pertains to sales-tax collection and remittance.  

According to the study, “State and Local Government Sales Tax Revenue Losses from Electronic Commerce,” the annual national state and local sales-tax losses on e-commerce will grow to $11.4 billion to $12.65 billion by 2012, bringing the six-year total loss of state and local sales-tax revenues between $52 billion and $56.3 billion. [The study only covers losses on e-commerce sales taxes and not all remote sales and use taxes that are due from catalog, television and mail-order sales.]

The online and remote sales marketplace has become a major source of retail sales in the United States, but many online retailers are not subject to sales tax. ICSC said it strongly supports the Streamlined Sales and Use Tax Agreement, which “substantially simplifies state and local sales tax systems, removes the burdens to interstate commerce that were of concern to the Supreme Court in the Quill case, and protects state sovereignty,” the company said.