Missouri is among half of U.S. states that are missing out on millions of dollars in tax revenue that could be collected on Internet sales.
Unlike Kansas and 23 other states, Missouri has not joined the Streamlined Sales and Use Tax Agreement, a 1999 agreement to simplify and encourage voluntary collection of sales taxes by e-commerce retailers.
Researchers at the University of Missouri Truman School of Public Affairs estimate that Missouri has lost $2.3 billion, or an average of about $468 million a year, in potential e-sales taxes over the last nine years.
That amount is expected to rise as Internet sales grow as a percentage of retail sales.
Missouri is likely to lose at least $1.4 billion in potential tax income from 2011 to 2014 by not participating in the Streamlined Sales agreement, researchers said.
Kansas, a Streamlined Sales participating state, received nearly $9.6 million in e-commerce sales tax revenue in 2010 alone, the most recent year tracked by researchers.
The Streamlined Sales and Use Tax was created by the National Governors Association and the National Conference of State Legislatures to simplify sales tax collection across jurisdictions that have varying tax rates, making it difficult for e-sellers to assess proper tax rates when they ship to various locations.
The agreement also was a response to a 1992 U.S. Supreme Court ruling that said states cannot levy sales and use taxes on entities unless the entities had physical locations in the state.
“For example, when a Missourian purchases a product from an online company that does not have a physical presence in Missouri, the state forgoes sales and use tax revenue on that transaction (such as amazon.com vs. Barnes and Noble),” the MU research report said.
Barnes and Noble, which has physical locations in the state, pays taxes on a book sale that Amazon, without retail locations in the state, does not, unless Amazon chooses to do so voluntarily.
The governing body for the Streamlined Sales agreement says that 1,400 retailers voluntarily collect sales taxes under the agreement.
About $700 million has been collected — “a very small fraction of the amount of sales tax that remains uncollected,” the board says on its Web page.
Thus, the MU researchers emphasized, it would be only a short-term revenue-enhancement solution for Missouri legislators to authorize participation in the Streamlined Sales agreement.
The better, longer-term solution, the report suggested, is for Missouri legislators to lobby Congress to pass new federal legislation.
The best outcome, said researcher Andrew Wesemann, is to permit sales tax on Internet transactions across state lines.
“But the variations of tax systems among states is too great to require that now,” Wesemann said.
A Marketplace Fairness Act, introduced in Congress and co-sponsored by Sen. Roy Blunt, a Missouri Republican, and Sen. Richard Durbin, an Illinois Democrat, would give states additional enforcement powers over e-sales tax collection.
The Marketplace act would allow states that wish to collect e-sales taxes to join the Streamlined Sales agreement or create a similar tax-simplification program of their own.
The National Governors Association estimates that the Marketplace legislation would allow states to collect $22 billion in e-commerce taxes by ramping up states’ authority to compel retailers to pay the taxes.
The Marketplace bill has earned backing from the National Retail Federation and some major online companies, such as Amazon.
“The act would bring equity to sellers and consumers in the sense that it would be harder for individuals to evade paying sales and use taxes,” the MU report said.
Also, the report said, the act would “level the playing field” for sellers with locations in the state, allowing them to be more price competitive with out-of-state e-tailers that aren’t charging sales taxes.
It also, researchers noted, would inject some price fairness for low-income people who don’t have computers and don’t shop on the Internet.
They pay sales taxes when they shop in stores that someone buying the same product online might not pay.