DMA: States Overestimate Potential E-Commerce Tax Revenue

A survey released on April 11 by the Direct Marketing Association concludes that the potential tax revenue lost to states due to online sales is just 10% of what other studies have claimed.

Using U.S. Department of Commerce data, the DMA says that if states were collecting taxes from online sales, by 2011 the tax revenue intake would range from $7.2 million in Vermont to $582.8 million in California. In contrast, says the DMA, state governors have said that by 2011 Vermont would gain $87 million and California $7.2 billion.

“The governors have used these hyperinflated numbers to manufacture a political crisis because they are trying to lobby Congress to effectively overturn 227 years of interstate commerce clause law,” DMA president/CEO Bob Wientzen said in a statement. “Our new analysis demonstrates there is no pot of gold for the states in creating new burdens for remote retailers.”

Governors, Wientzen says, have relied on University of Tennessee studies that in turn used data from the Internet boom years, making assumptions that resulted in the overestimates. These assumptions include 38% e-commerce growth, a low rate of business compliance on sales tax remittance, and the failure to separate business-to-business Internet activity from preexisting b-to-b marketing.

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