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State Unable To Collect Amazon Tax

by Hugh McQuaid | Nov 16, 2012 6:30am
(10) Comments | Commenting has expired
Posted to: Business, State Budget, Taxes

It’s been more than a year since the state’s so-called Amazon tax went into effect, requiring all online retailers to remit sales taxes to the state. But so far the state’s been unable to collect revenue from it.

Revenue Services Commissioner Kevin Sullivan said the tax has brought no appreciable revenue to the state’s coffers. Sullivan made the comments Thursday before the governor’s monthly commissioners meeting where his budget secretary gave a presentation on the state’s current $365 million budgetary shortfall. The gap was caused in large part by declining revenue.

So far, the Amazon tax has been about as effective as Sullivan predicted it would be in April 2011, when he wrote to budget Secretary Ben Barnes. At the time, the Office of Fiscal Analysis was projecting a $9.4 million revenue bump as a result of the tax. Sullivan told Barnes not to expect the added cash because the tax was uncollectible.

Although people are required to pay a use tax for goods purchased online from companies in other states, the tax is ignored by most.

But following the passage of the Amazon tax bill, major online retailers like Amazon and Overstock.com pulled their business from affiliated companies in Connecticut.

So has the tax been a total loss? Not if you ask Tim Phelan, president of the Connecticut Retail Merchants Association. Phelan said that if nothing else, the tax has sent a symbolic message to brick and mortar stores who are at a disadvantage having to compete with online stores not charging sales tax.

“States like Connecticut have said ‘We don’t know what kind of impact this is going to have but goddamnit we’re going to do it because it’s not fair,’” he said. “. . . At least it’s sent a signal to Connecticut retailers that the state of Connecticut cares about them.”

But Sen. Andrew Roraback, the ranking Republican on the Finance, Revenue and Bonding Committee, said that while the tax sent a message, he wasn’t sure passing the bill was a fruitful exercise.

“I’m very sympathetic to my local bookstore. I want to help it succeed but I think we should help them by doing something constructive. If we’re sending messages that are ineffective, I’m not sure how constructive that is,” Roraback said.

Roraback said he thought the state had essentially thrown its hands in the air and given up on the tax and hoped Congress would pass a solution. Sullivan said both the state and federal government are pursuing avenues to resolve the situation.

The state is hoping to get major retailers to agree to collect and remit the tax. Sullivan suggested the state was currently in talks with one.

“Nothing will happen until we can get one of the major retailers to bite,” he said. “That’s as much as I can say right now.”

The other prospect would be an act of Congress. Sullivan said there have been a few pieces of legislation aimed at getting online stores to pay sales taxes to states. Though they have yet to pass, he said the lawmakers who were pushing the bills have been re-elected.

Gov. Dannel P. Malloy said Wednesday he expects Congress to act during next year’s legislative session, in part because of pressure created by laws like the Amazon tax.

“I believe and predict that there will be a resolution of that issue in this Congress as a result of what we and other states have done,” Malloy said. “When we have a global answer to this . . . I think it will be very good for brick and mortar retailers.”

Malloy said that if Congress acts quickly in its first few months, online sales tax may even be able help raise revenue during the next fiscal year when the state is projecting a $1.18 billion shortfall.

“If we can build it into our July 1 assumptions, there’s a plus side for us,” he said.


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(10) Comments

posted by: state_employee | November 16, 2012  8:28am

Malloy doesn’t give a rats behind about “brick and mortar retailers.”  He just wants to suck more money out of the people of CT, any way he can.  I am so sick of being taxed into an oblivion. 
I am a state employee and even I know he needs to cut spending.  He can’t because the unions need their dues.  If he lays off 5000 state employees, that is ALOT of union dues they lose.  He should be ashamed of himself.

posted by: state_employee | November 16, 2012  8:30am

He’s worried about an online tax…????  What about the $500 million busway, the corporate welfare, the plush contracts of his political appointees, the salaries/benefits and numbers of the general assembly…??? 
Cut the state workforce…

posted by: ConnVoter | November 16, 2012  9:18am

If you want to blame anyone for the loss of tax revenue to Amazon, blame your neighbors who buy stuff from them but fail to report the purchases on their income tax returns and pay “use tax.” 

Don’t blame Amazon, which cannot be forced to become Connecticut’s collections agent because it does not have any bricks and mortar here.

If Connecticut residents followed the law, this wouldn’t be an issue.

posted by: JamesBronsdon | November 16, 2012  12:33pm

Gotta love the dreamer in Governor Malloy.  (“If we can build it into our July 1 assumptions, there’s a plus side for us,” he said.)  I predict Congress has enough problems on its hands that it pays no attention whatsoever to this issue.  But if Governor Malloy wants to count this revenue into his projections, by all means.  It’ll be just as phony as everything else, and will give him even more parties to blame when it all blows up.

posted by: DirtyJobsGUy | November 16, 2012  4:03pm

The current system benefits small CT online sellers (more than you would think).  To setup tax accounts with 50 states is a nightmare and for the states costs more money to process than they collect. 

But not all retailers are just on-line.  For 50 years REI was a mail order only with a small store in Seattle.  Now they are opening retail stores all over the USA.  If you can’t be within 6% of Amazon’s price including shipping maybe the local brick and mortar guys are too costly.    A better way to address this is to help CT retailers be more cost competative.

posted by: ocoandasoc | November 17, 2012  6:50pm

The State of CT could easily force Amazon into compliance. CT residents who buy through Amazon and do not pay tax on their purchases are breaking the law. The State of CT could threaten to subpoena Amazon’s records for all CT purchases over the last seven years so they could prosecute their customers. This would cripple Amazon’s CT sales—so they would make a deal going forward to charge the tax.

posted by: Paul Passarelli | November 18, 2012  6:21pm

One more demonstration of government incompetence!  Critics said the tax would not raise $$$, and the critics were correct (myself included).

posted by: JustTheFactsNow | November 20, 2012  1:33pm

Oh my! I would love the State of Connecticut to subpoena the Amazon records. Then we could see all the DRS employees, state legislators, and commissioners that violated the law and ddidn’t pay the tax due! Go for it!

posted by: shinningstars122 | November 24, 2012  1:03pm

shinningstars122

Once again we have posters seeing the tree instead of the forest on this issue. Its clear that when online shopping was created they, Amazon etc., lobbied to be exempt from paying state sales taxes.

It clearly has been abused to the point that now Walmart, Best Buy, Target etc. all have major online business that do not pay sales taxes any more. Last year e-commerce sales totaled $193.4 billion and were not taxed. If you were to suppose their customers paid an average of 5% that would be $9.67 billion for state coffers.

You might think that is money the consumer saved in the price but that is not totally accurate.

Possibly you might pay 10-15% less on any item but there are hidden costs that the e-retailers pass onto their customers. Their employees are paid so low and have no benefits that they and their families must depends on food stamp and other government assistance and many are on Medicaid.

Many of these “pickers” as they are now known as make minimum wage and this means they buy less and contribute less in taxes due to their employer not having a brick and mortar store.

If you want to “broaden” the base to borrow a term from GOP leaders this has to change. Honestly this is just another form of corporate welfare folks.

posted by: GMR | November 25, 2012  11:33am

GMR

I thought if an online merchant had a store or warehouse or office or any “nexus” within a state, they had to collect and pay sales tax?  But the article says CT is trying to work out an agreement with Sears, but there’s a huge Sears store in the Danbury Mall (and probably they have other locations in CT as well).  Amazon has no presence in the state, so they can get around the collection of sales tax.

Connecticut has a relatively simply sales tax structure (only food that isn’t individual consumption sizes is exempt).  However, many states have much more complicated sales tax structures, including some states that allow counties or cities to add their own sales tax (and postal addresses don’t always coincide with city limits—for instance, there are about 20 houses in CT with a Greenwich address but which are located in Stamford).