Magazine article Government Finance Review

New E-Commerce Reports Underscore Need for Simplified Sales Tax System

Magazine article Government Finance Review

New E-Commerce Reports Underscore Need for Simplified Sales Tax System

Article excerpt

Online sales topped $104 billion in 2003, a nearly 40 percent jump over the previous year and yet state and local governments lost an estimated $15.5 billion in revenue because states cannot effectively collect sales and use taxes on e-commerce purchases, according to a report commissioned by the National Governors Association and National Conference of State Legislatures and updated figures from the University of Tennessee's Center for Business and Economic Research.

The reports support those who are working to simplify state sales tax systems and level the playing field for all retailers under the Streamlined Sales and Use Tax Agreement. In recent years, NGA and NCSL have spearheaded efforts to simplify and streamline the system through the SSUTA, which would create one uniform system to administer and collect remote sales taxes.

"These studies show how absolutely critical it is for states to collectively simplify their antiquated sales tax laws," said NGA Executive Director Ray Scheppach. "To date, 42 states and the District of Columbia have signed on to work towards a simplified tax system. Implementation of the agreement would level the playing field between 'remote' sellers that are not obligated to collect and remit sales taxes and Main Street retailers, which must collect sales taxes."

In the first report, "The Growth of Multichannel Retailing," Forrester Research found that established "brick and mortar" stores, like Borders and Wal-Mart, are increasingly selling their goods online, transforming the whole notion of retailing by catering their business to tech-savvy consumers. Forrester credits today's e-commerce boom with traditional Main Street stores' effective use of the Internet rather than Web-only retailers like Pets.com.

Internet sales at so-called "multichannel" stores, such as Target and Sears, grew almost 60 percent in 2002 and 32 percent last year, whereas Web-based retailers grew only 13 percent in 2003. …

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