Huffpost Business

States Miss Out Out On Billions As Online Sales Taxes Go Uncollected: Report

Posted: Updated:
Amazon CEO Jeff Bezos addresses a press conference to introduce new Amazon and Kindle products in New York, September 28, 2011.
Amazon CEO Jeff Bezos addresses a press conference to introduce new Amazon and Kindle products in New York, September 28, 2011.

State governments are losing out on much-needed tax revenue from rich online retailers, even as they're forced to lay off teachers and policemen.

The state of Missouri alone has lost $468 million per year in uncollected online sales tax revenue over the past decade: $4.68 billion in total, according to a new study from David Valentine, a public policy professor at the University of Missouri. The study estimates that Missouri will lose another $1.4 billion in sales tax revenue to online retailers between 2011 and 2014. (h/t the Kansas City Star.)

To put that lost tax revenue into perspective, that $468 million would comprise 38 percent of Missouri's entire annual education budget, which state lawmakers are slashing.

Some states have tried to collect sales tax from online retailers voluntarily, but their efforts have largely failed, according to the study. On average, the 24 states collecting voluntary online sales tax revenue collected $30.7 million in online sales tax revenue between 2005 and 2010. Missouri is not one of those 24 states.

Online retailers are taking advantage of a 1992 Supreme Court decision that mandates that states cannot force online retailers to pay sales taxes unless they have a physical connection to the state, according to NPR. Amazon.com does not have a physical presence in most states and is based in Seattle.

Online retailers have also been paying minimal federal income taxes. Apple paid a top tax rate of 9.8 percent last year, Google paid a tax rate of 11.9 percent, and Amazon.com paid a tax rate of 3.5 percent, according to the Greenlining Institute. This is thanks in part to the fact that online retailers such as Apple and Google claim they are selling their products online around the world from low-tax countries such as Luxembourg, the Netherlands, Ireland, and the British Virgin Islands, according to The New York Times and Bloomberg News.

Correction: An earlier version of this story incorrectly said that Amazon was based in California.

Around the Web

Study says uncollected online sales taxes cost Missouri millions ...

Study: Missouri losing millions in uncollected online sales taxes - St ...

Momentum growing for sales taxes on online purchases ...

Arizona bills Amazon $53 million for uncollected sales taxes

Roger Harris: Uncollected Internet sales tax unfair » Knoxville News ...

Study says uncollected online sales taxes cost Missouri millions

Amazon, state working on sales tax collection deal

Online Sales Tax Would Harm Small Business and Interstate Commerce