Issues

While Jefferson and Orleans parishes have both reported dramatic shortfalls in projected sales tax revenue for 2009, little has been said about the role that the popularity of online retail plays.

Consumers are drawn to the convenience and savings that tax-free online shopping provides, but don’t realize that their community pays for these savings in three significant ways.

First, low-income families carry an unfair tax burden since credit card and internet access, and therefore tax-free online retail, are most available to higher income brackets. Thus, the most regressive form of taxation becomes even more regressive.

Second, the community loses needed tax revenue to fund public services including police protection, healthcare, and schools. Internet retailers with no physical presence or “nexus” in a state are not required to collect sales taxes on purchases. In theory, consumers are required to keep track of their online purchases and then pay the appropriate amount owed in sales tax as “use tax” on their state tax return. In practice, this “fair use tax law” is nearly unenforceable. A 2009 University of Tennessee study estimated that uncollected sales taxes on e-commerce cost Louisiana $344 million in 2010 and predicts those losses will rise to $440 million by 2012.

Finally, exempting online retailers from collecting sales taxes puts bricks-and-mortar businesses at a competitive disadvantage. In Orleans and Jefferson parishes, where sales taxes approach ten percent, companies like Amazon, the nation’s 20th largest retailer, are granted, in effect, a nearly 10 percent price advantage over local businesses.

Local businesses adversely affected by this are working with The Urban Conservancy to bring attention to this serious matter. If you would like to get involved, contact Dana Eness at 504-561-7484 or dana@urbanconservancy.org

Read The Urban Conservancy’s May 2011 editorial in New Orleans CityBusiness.
(Archived copy here)

See our June 2011 Action Alert, including a sample letter to representatives, urging Louisianians to support e-fairness here.

Read more about this issue within the national context.

Read a May, 2010 New York Times article and editorial about how a precedent-setting battle to enforce sales tax collection by Amazon.com is playing out in the state of New York.