Amazon Sales Tax Won’t Provide State Revenue

Amazon Sales Tax Won’t Provide State Revenue

Amazon is pursuing a referendum in response to a new California law that subjects internet retailers to sales tax. Mercatus Center Senior Research Fellow Adam Thierer says that state claims of desperately needing the money are nothing new, but this measure won’t fill their coffers.  

“Net taxes won’t yield them much,” Thierer explained. “A 2010 study conducted for NetChoice by Jeffrey Eisenach and Robert Litan of the economic consulting firm Empiris LLC revealed that total potential uncollected sales tax revenues in 2008 were approximately $3.9 billion, or less than three-tenths of one percent of state and local tax revenues.”

States like North Carolina and Illinois, who imposed similar taxes, have already felt the pains of canceled commission arrangements, loss of in-state jobs, and a decrease in tax revenue from online vendors leaving their states.

“The best fix might be for states to clarify tax sourcing rules and implement an ‘origin-based’ tax system,” Thierer said. “Traditional sales taxes are already imposed at the point of sale, or origin. If you buy a book in a Seattle bookstore, the local sales tax rate applies, regardless of where you “consume” it. Why not tax net sales the same way?”

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