EXPERT AVAILABLE: Supreme Court Opens Door for State Internet Sales Tax, MU Expert Says

‘Cyber Monday’ record sales show how much revenue is lost by states without Internet sales tax

December 4th, 2013

The views and opinions expressed in this “for expert comment” release are based on research and/or opinions of the researcher(s) and/or faculty member(s) and do not reflect the University’s official stance.

COLUMBIA, Mo. – Early reports show ‘Cyber Monday’ sales reached record highs again this year, with an increase between 17 and 19 percent of total Internet retail sales. Also, sales from mobile devices increased more than 60 percent during the Thanksgiving weekend. On ‘Cyber Monday’, the U.S. Supreme Court denied an appeal from online retailers Amazon.com and Overstock.com over a New York state Internet sales tax law. Andrew Wesemann, a doctoral student in the Institute of Public Policy at the University of Missouri Truman School of Public Affairs and who has conducted extensive research on Internet sales taxes, says this Supreme Court decision opens the door for many more states to adopt similar Internet sales taxes.

“The New York state law requires online retailers like Amazon to collect and remit a state sales tax if they work with third party outlets that are located in the state of New York,” Wesemann said. “By refusing to hear the case, the Supreme Court may be opening the door for other states to adopt similar laws, which could bring in large streams of new revenue to cash-strapped governments.”

Wesemann also says this development may put pressure on the federal government to move forward with their own Internet tax legislation.

“The Marketplace Fairness Act, which has already been passed in the U.S. Senate, would require states that decide to levy Internet sales taxes to either join existing Internet sales tax agreements or create their own system that meets certain federal guidelines,” Wesemann said. “With the Supreme Court possibly opening the door for more states to adopt their own Internet sales taxes, it may push Congress to pass the Marketplace Fairness Act to help regulate the system.”

Wesemann’s previous research found that Missouri has lost about $259 million annually in sales tax revenue in the last decade with an expectation for that number to rise in future years. In addition to increasing tax revenue, Wesemann thinks that the state economy could benefit from e-commerce sales taxes as well.

“By taxing out-of-state online retailers, states may level the playing field for retailers located inside state lines, incentivizing consumers to buy locally,” Wesemann said. “This difference can result in a competitive advantage for firms based outside of state lines. Untaxed purchases made through websites and mail order firms, such as Amazon, account for this large amount of uncollected sales tax.”

Currently, 24 states collect a modest amount of online sales tax through the Streamlined Sales and Use Tax Agreement.