Report: Online Retailers Cost MA $387 Million in Tax Revenue

Saturday, November 24, 2012

GoLocalWorcester News Team

Bay State consumers may enjoy the convenience of shopping online, but the lack of sales tax on online transactions is making a dent in the Commonwealth's bottom line and putting local retailers at a disadvantage.

The Massachusetts Main Street Fairness Coalition released a new economic study that details the adverse impact that the online sales tax loophole, in which online retailers only have to charge a consumer a sales tax if they have a physical presence in that consumer’s state, is having on local businesses and state revenues.

With $6 billion dollars in online purchases made by Massachusetts shoppers in 2011, the coalition concluded that the loophole cost 1,970 new jobs, $280 million in sales to local businesses, and $387 million in state tax revenue. The state is currently home to over 500,000 retail jobs.

The report, prepared by the Cape Ann Economics and authored by Edward Moscovitch and Cameron Huff, said that those figures could double by the end of the decade if the tax loophole remains open.

"By 2020, the additional sales would total $587 million, with 4,154 new jobs. These economic impacts in turn would generate $8 million of new income and property tax revenues in 2011, rising to $18 million in 2020."

Kim Driscoll, Mayor of Salem, and co-chair of Massachusetts Main Street Fairness Coalition said the report paints a clear picture of the negative effects the loophole continues to have on the state’s economy and underscores the need for action to level the playing field for local businesses.

"This is a valuable study that shows the consequences, in terms of lost jobs and revenues, of a policy that is unfair and badly out of date,” said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation.

“As online sales continue to grow, the costs to the Commonwealth will only get greater and greater over time.”

Meanwhile, Massachusetts Treasurer Steven Grossman issued a letter to U.S. Senator Max Baucus, Chairman of the Senate Committee on Finance, urging him to support legislative efforts to allow states to implement uniform Internet sales tax laws.

“This is fundamentally an issue of Main Street fairness - brick and mortar stores that create and support local jobs should not be at a competitive disadvantage against out-of-state online sales giants,” said Grossman. “It’s time to level the playing field by creating a consistent sales tax policy.”

Grossman pointed to bipartisan legislation authored by Senators Mike Enzi and Richard Durbin as an example of a fix at the federal level. While Massachusetts officials have entered into negotiations with Amazon.com to discuss charging an online sales tax, a federal law is generally viewed as the most effective way to compel all online retailers without a physical presence in a state to charge that state’s sales tax.