Today is Cyber Monday, the first day back in the office after Thanksgiving – and one of the biggest days of the year for online shopping. One thing that will be different this shopping season is that for the first time, Amazon will be collecting sales tax on purchases made by Wisconsin residents. Amazon’s move is expected to increase state revenue by $30 million in the first year.
Wisconsin residents always owed sales tax on purchases made online, but until recently, the state could not compel Amazon and other online-only retailers to actually collect the tax. Instead, Wisconsin residents were supposed to report their purchases and pay the sales tax on their income tax forms, something few people did. The fact that online-only retailers did not charge consumers sales tax – even though sales tax is owed on the purchases – gave online-only retailers a competitive advantage over retailers with “bricks and mortar” presences in the states. Read more
After the Joint Finance Committee (JFC) wraps up work this evening on the May 23 agenda, its next meeting will be Wednesday, May 29, starting at 10:00 a.m. in Room 412 E. The major topic of discussion and debate on the 29th will be K-12 education. I believe all of the remaining K-12 issues are on the agenda.
Other items on the agenda that day include some proposals for new sales tax exemptions, some of the smaller DHS issues, and the public benefits fund used for low-income weatherization and energy assistance.
A full list of the items being considered can be found here, with links to each of the papers. The outline below includes links to some of the many Legislative Fiscal Bureau papers:
- Sales and Use Tax Exemption for Qualified Research in Biotechnology and Advanced Manufacturing (Paper #295)
- Sales and Use Tax Exemption for Veterinary Services (Paper #296)
- Sales and Use Tax Exemption for Services of Printing and Imprinting Advertising and Promotional Direct Mail (Paper #297)
- Coordinated Services Teams (Paper #346)
- Peer-Run Respite Centers (Paper #347)
- Office of Children’s Mental Health (Paper #348)
- Health Care Data Organization Grant (Paper #349)
- Graduate Medical Education Program Grants (Paper #350)
- State Support for K-12 Education and General School Aids Funding Level (Paper #505)
- General Aid Calculation for Consolidated School Districts (Paper #506)
- School Performance Incentive Grants (Paper #510)
- Educator Effectiveness Evaluation System (Paper #511)
- Milwaukee and Racine Parental Choice Programs — Per Pupil Payments (Paper #515)
- Expansion of Parental Choice Program for Eligible School Districts (Paper #516)
- Special Needs Scholarships (Paper #517)
- Pupils Enrolled in Home-Based Private Educational Programs (Paper #524)
Jon Peacock Read more
Vote on Non-binding Resolution Shows Bipartisan Support to Require Internet Retailers to Collect Sales Taxes
Increasingly in recent years, there seem to be few tax issues on which liberals and conservatives can agree. So it was refreshing last Friday when there was strong bipartisan support for requiring large Internet merchants to collect state and local sales taxes – just as Main Street retailers do.
Perhaps the bipartisan support shouldn’t come as a surprise because the proposal isn’t primarily about taxes; it’s about fairness. People with a broad spectrum of views about taxes and spending agree that it’s unfair for our local businesses and bad for the Wisconsin economy to allow large Internet retailers like Amazon and Overstock to put their local competitors at a huge competitive disadvantage by not collecting sales taxes.
The 75-24 vote last Friday was on an amendment to add the Marketplace Fairness Act to the Senate’s 2014 budget resolution. Read more
11-11-11 – No, that isn’t a new alternative to Herman Cain’s tax plan (at least not that I know of); it’s merely today’s date. But in addition to being Veterans Day, today seems to be a good time to note that the tide continues to be turning slowly in favor of applying sales taxes directly to online sales. The latest evidence of that tidal shift came Wednesday, when Amazon announced its support for a new bill that would allow states to require online and catalog retailers to collect sales taxes from their customers.
Until recently, Amazon vigorously fought efforts to tax online sales. Its position began to soften a bit after a heated battle with California over a law there that endeavors to force online sales tax collection. In early August, Amazon came out in favor of a bill introduced in Congress by Democrats authorizing states to collect taxes on online sales. Read more
The new Legislature has approved or proposed a variety of sales tax exemptions. The exemptions give favored tax status to certain purchases, result in similar goods being treated differently for tax purposes, and add complexity to a sales tax system already rife with exemptions. While each individual sales tax exemption is not going to break the budget, when taken as a whole, the exemptions drain much-needed revenue out of the state’s coffers.
The sales tax in Wisconsin already includes several dozen exemptions. Some exemptions represent a significant amount of lost tax revenue. For example, the exemption for food reduced state sales tax revenue by $534 million in 2010. Other sales tax exemptions represent a very minor amount of lost revenue, like the exemption for live game birds and clay pigeons, which reduced state revenue by $200,000 last year.
Since the new Legislature took office at the beginning of this year, it has been working to carve out additional sales tax exemptions. Read more
California and Amazon.com have reached an agreement on the collection of sales tax that may lay the groundwork for significant changes in other states as well. As part of the agreement, Amazon will collect sales tax on purchases made in California starting in July 2012, unless there is federal legislation enacted before then that would supersede state law.
California’s agreement with Amazon comes after years of states trying, without success, to force online retailers to collect sales tax. Sales tax is owed on purchases whether those purchases are made online or in physical stores, but states are on shaky legal ground when they try to force online retailers to collect the tax. And big online retailers such as Amazon have devoted significant resources to thwarting states’ collection efforts. (You can read a more thorough analysis of this issue in our 2010 analysis, “Examining Wisconsin’s Progress in Leveling the Tax System for Retailers.”)
California’s agreement with Amazon requires the retailer to start collecting sales tax, but not until the middle of 2012. Read more
For years now, states and online-only retailers (like Amazon.com) have locked horns over the issue of sales tax. There have been several new developments in this battle, but at this point it’s hard to tell whether the states or the retailers have the advantage.
Amazon, like other on-line only retailers, is only required to collect sales tax in the states in which it has a physical presence. Amazon has warehouses and other facilities in dozens of states (including Wisconsin), but those facilities are technically owned by subsidiary corporations. As a result, Amazon is able to avoid imposing a sales tax on its customers in most states, costing states billions in revenue and giving online retailers an advantage over similar Main Street businesses.
Keep in mind, sales tax is still owed on purchases made online. But instead of being collected by the retailer, customers are supposed to submit the sales tax as part on their income tax return. Read more
Recently, a number of states have turned their focus to collecting sales tax owed on purchases made from internet retailers. This may be because state tax revenues have been slow to recover from the effects of the recession, leading states to make a renewed emphasis on collecting tax revenues that are owed to the state but are not collected.
This uncollected sales tax can add up quickly. A recent Associated Press article estimated that each year, uncollected sales tax on internet purchases total more than $23 billion nationally. In Wisconsin, the state loses $127 million each year in uncollected sales tax revenue for purchases made online, according to a University of Tennessee study.
When a customer makes a purchase from an online-only retailer that does not have a significant physical presence in the state, such as Amazon.com, sales tax is owed on the transaction just as if the purchase were made at a bricks-and-mortar store. Read more
It’s taking longer than we would like for the state’s tax revenue to recover from the effects of the recession, and a provision in the Governor’s executive budget would further slow the growth of tax revenue deposited in the General Fund.
Tax revenue to the general fund took a hit in the national recession, which is one of the main factors underlying the state’s significant budget deficit. The Wisconsin Budget Project recently released an analysis showing that state revenue in Wisconsin was growing at a moderate, sustained pace in the middle of the decade. Then the national recession occurred, with devastating effects on the state’s tax revenue. The economy has started to recover, but revenues to the general fund are still down for fiscal year 2011. In fact, when inflation is taken into account, the state is on track to collect less in revenue than it did in 2001.
Revenue to the state’s general fund would taker a further hit with Governor Walker’s proposal, which would move a percentage of the sales tax generated from motor vehicles and motor vehicle parts to the transportation fund. Read more