Please note: Letters to the editor do not necessarily reflect the opinions of The Urban Conservancy. If you have a letter, or wish to respond, please contact us.
Letter to Neil Abramson Urging “E-Fairness”
January 20, 2010
Representative Neil C. Abramson
365 Canal Street
New Orleans, LA 70130
As an independent bookseller based in New Orleans, I am writing to urge you in the strongest terms to address a serious issue of business equity and fiscal prudence as it relates to the collection of state sales tax for online sales.
As I’m sure you know, currently, some out-of-state retailers with nexus in Louisiana are refusing to comply with our state’s sales tax law and are not collecting and remitting state sales tax for sales to residents of Louisiana. I hope you will take immediate steps to close this tax loophole by directing the state taxing authorities to enforce existing state law and to require out-of-state online retailers with nexus in Louisiana to collect and remit sales tax.
Federal law clearly defines nexus as a retail store, warehouse, office, or sales agent. I believe it is indisputable that any out-of-state online retailer that has one or more affiliates based in Louisiana — affiliates that clearly act as solicitors on the online retailer’s behalf and earn commissions based on sales — has nexus in our state. These out-of-state online retailers should therefore be charging sales tax. Louisiana booksellers and other in-state businesses that have e-commerce operations collect and remit sales tax, and so should merchants outside our state that have nexus in the state.
It is very important that you act now. According to the Center on Budget and Policy Priorities, the worst recession since the 1930s has caused the steepest decline in state tax receipts on record. Even in the wake of drastic budget cuts, states are facing enormous deficits, shortfalls that are project to continue into 2011. In Louisiana, we have a projected budget gap of approximately $248 million, according to ABC News. It’s estimated that the total state and local sales and use tax revenue losses from e-commerce sales in Louisiana will total $344.7 million for 2010, and they are projected to reach $439.6 million in 2012. By refusing to obey the law, companies like Amazon.com are siphoning away critical revenue that should be going to essential local services such as policing and fire fighting.
The Nelson A. Rockefeller Institute of Government’s October 2009 edition of the State Revenue Report noted that, for the second quarter of 2009, sales tax revenue in all states declined by 9.5 percent. Meanwhile, as traditional retail sales remained flat or declined this past holiday, online sales appeared immune to the recession. According to the National Retail Federation, Internet sales increased by about 14 percent on the Monday after Thanksgiving and, according to ComScore, 5 percent overall, and show exponential growth each year.
The failure to equitably enforce existing state tax law has put Louisiana retailers at a significant competitive disadvantage to e-commerce competitors. With a “discount” of about 4 percent, out-of-state online giants have an enormous competitive advantage over in-state retailers selling the same merchandise. These in-state businesses employ thousands of residents and collect millions of dollars in sales tax, and inequitable enforcement of state sales tax law puts these core engines of our state economy in jeopardy.
In 2008, New York State signed into law a provision that required out-of-state merchants that have clear nexus in the state to collect and remit sales tax. Though the provision was initially challenged by Amazon.com, a New York State Supreme Court judge dismissed the online retailer’s lawsuit. Amazon.com is currently collecting New York sales tax and has maintained its affiliate network in the state. In 2009, North Carolina and Rhode Island passed e-fairness laws modeled after New York’s.
It is not the business of state government to play favorites when it comes to enforcing tax law. The results of sales tax inequity can be seen in the many empty storefronts on Main Streets (or Canal Streets) throughout Louisiana. Sometimes, however, it doesn’t result in a store closure, but in lost sales tax through decreased sales and lost income tax through job cuts. A downturn on Main Street creates a ripple effect seen throughout our state’s economy, resulting in higher property taxes and budget cuts for police and fire departments. It’s important to understand that when out-of-state retailers with affiliates in our state shirk their responsibility to collect and remit sales tax, it doesn’t just affect a few small businesses here or there, it hurts the state’s entire economy.
For the good of in-state businesses — and all of the residents of Louisiana — I sincerely hope that you will take a stand for equity and will direct our state taxing authorities to enforce existing state law and require out-of-state online retailers with nexus in Louisiana to collect and remit sales tax.
Thank you for your consideration.
Thomas P. Lowenburg, Owner
Jan 21 2010