UPDATED 6/22/2011 : Associated Press just issued a correction for this article: AUSTIN, Texas (AP) — In a story June 19 about collecting sales tax on Internet sales, The Associated Press incorrectly reported that the $23 billion in uncollected sales and use tax could employ 46,000 teachers. That number should have been 460,000 teachers.
Original Post 6/20/2011: A terrific new AP article puts a human face on just what the failure to collect sales tax online means by looking at its impact on state budgets:
State governments across the country are laying off teachers, closing public libraries and parks, and reducing health care services, but there is one place they could get $23 billion if they could only agree how to do it: Internet retailers such as Amazon.com.
That’s enough to pay for the salaries of more than 46,000 teachers, according to the U.S. Bureau of Labor Statistics. In California, the amount of uncollected taxes from Amazon sales alone is roughly the same amount cut from child welfare services in the current state budget.
It looks at the case of Texas in particular, which has been in the news recently—and this blog—for the public debate between the governor and legislature over online sales tax:
Texas cut $24 billion in state services to cover its revenue shortfall. That included decisions not to fund the expected growth in the number of public school students and the expected growth in the caseload for Medicaid, the health care program for the poor and disabled.
The article emphasizes that in Texas, as elsewhere, small businesses are suffering because they cannot offer the sales tax discount that online retailers can:
When Texas lawmakers took up such a bill [to force big online retailers to collect sales tax], most of the testimony came from owners of small businesses. Gregg Burger, the general manager of Austin’s Precision Camera, complained that customers come into his store to inspect the products, but then go online to buy them to avoid the sales tax.
“We get people all the time who come in, talk to a salesman for 15 minutes to half an hour … and then go, and we know they are going to buy it online because they can save money. In theory, they are stealing our time,” Burger said. “We’re losing at least 15 percent to online, out-of-state, so we’re losing anywhere between $3 million and $5 million a year in business.”
The article offers a clear and thorough background on online sales tax, too—but we recommend it particularly for its explanation of what collecting online sales tax could mean for state budgets, and therefore for ordinary citizens.