States want to recapture ecommerce sales tax as more shoppers go online. The growth of Internet sales over Black Friday weekend and Cyber Week will likely increase the calls for Congress to take action to close the loophole that limits a state’s ability to collect sales tax revenue from out-of-state online retailers.
Black Friday Weekend – A survey conducted on behalf of the National Retail Federation (NRF) estimated that Black Friday weekend sales increased 16 percent to $52.4 billion up from $45 billion in 2010 and shoppers spent on average $398.62 up 9 percent from $365.34 in the prior year. Not everyone waited in lines at brick and mortar buildings; more and more shoppers went online. According to the same survey, nearly 40 percent of Black Friday weekend sales were online, increasing 26 percent from last year. Others reported similar online sales growth, year over year. On Black Friday alone, consumers spent $816 million online, up 26 percent from $648 million in 2010, according to comScore research.
Cyber Monday – Online sales on Monday, November 28 increased 22 or 33 percent versus a year ago, according to comScore research and IBM research, respectively. Cyber Monday set a record of $1.25 billion online and kicked off Cyber Week which reached $5.9 billion online, 15 percent higher than last year. Additionally, the use of mobile devices to make online purchases on Cyber Monday increased 186 percent to 6.6 percent up from 2.3 percent in 2010, according to the same IBM research.
On November 9, nine U.S. Senators introduced a bipartisan bill titled the Marketplace Fairness Act (S. 1832) to expand the requirement for out-of-state online retailers to collect state sales tax. On Cyber Monday, Benjamin Orr writes on the Maryland Budget & Tax Policy Institute’s blog, that Maryland needs to collect internet sales tax from out-of-state internet retailers in part to help bridge the gap in the state’s budget shortfall. On Wednesday, November 30, Indiana State Senator Luke Kenley (R-Noblesville) testified before a House Judiciary Committee hearing “Constitutional Limitations on State’s Authority to Collect Sales Taxes on E-Commerce.” In his testimony, he said “If e-commerce sales are increasing at a rate greater than total sales the difference must be sales that would have otherwise gone to a local retailer.”
Earlier this year, Maryland Bureau of Revenue Estimates launched a study to calculate how much tax revenue the state is losing from Marylander’s who shop online, at the request of state officials. The 2011 “Maryland Remote Sales Tax Loss” study estimates that lost state tax revenue from remote sales will be $219.3 million in 2011 and increase to $318.9 million annually in ten years. The state currently does not collect Maryland sales tax from Amazon the largest online retailer, among many other online retailers, including Newegg Inc., Netflix Inc., HSN Inc., Overstock.com Inc., Vista Print Ltd., and 1-800-Flowers.com Inc., just to name a few. We’ll have to watch and see if this matter is addressed during the upcoming state legislative session.
Article published in Southern Maryland News Net. 5 Dec. 2011
