The state of Missouri forfeited approximately $2.30 billion in online sales tax revenue over the nine-year period from 2001 to 2009, and it could lose out on another $1.78 billion between 2010 and 2014 if it doesn’t take steps to get more online retailers to collect sales tax, the University of Missouri says in a study of the state’s e-commerce sales and sales tax records.

The study, conducted last year by the university’s Truman School of Public Affairs, urges the state to join the Streamlined Sales Tax Agreement, under which 24 states have worked to simplify the cross-state collection of sales by taking such steps as developing common rules on what products are taxable. The ultimate goal of the Streamlined Sales Tax Agreement, or SST, is to standardize state and local sales tax rules, addressing a major argument that Internet and catalog retailers make in arguing they should not be required to collect sales tax from all consumers.

Under existing federal law, states can require sales tax collection only by retailers with an in-state physical presence, such as stores or distribution centers. Another often-cited study by the University of Tennessee estimated that states could have gained a combined total of about $23 billion in tax revenue in 2012 under a nationwide system of collecting tax on web and catalog sales.

Although several sales tax bills failed to make it through Congress last year, tax experts say they expect to see new legislation submitted this year, and say it has a better chance of passing. “If not this year, we fully expect it within the next Congress,” Maureen Riehl, vice president of government affairs at the Council on State Taxation, said when several bills were being considered last year. The Council on State Taxation is an industry group representing major retailers including Wal-Mart Stores Inc., Sears Holdings Corp. and Amazon. Wal-Mart is No. 4 in the Internet Retailer Top 500; Sears is No. 8 and Amazon is No. 1.

But Missouri doesn’t have to wait for federal legislation to start gaining revenue through sales tax collected by retailers, the Truman School study says. It suggests the state implement a short-term strategy of joining the SST as a participating member state that conforms to the standardized tax rules, noting that such states have already received revenue from remote retailers that have volunteered to begin collecting sales tax in SST member states. The SST program encourages such volunteer actions by having the participating states cover the cost of using tax collection software certified by the SST Governing Board. The free software deal only covers merchants that collect sales tax even though they are not legally required to do so. More information on sales tax software vendors is available here.

The Truman School study cites SST figures showing that SST states collected a combined total of nearly $740 million in sales tax revenue from merchants that volunteered to collect sales tax between 2005 and 2010. The SST Governing Board’s web site says 1,400 retailers have volunteered to collect sales tax.

Missouri is listed on the SST Governing Board’s web site as an advisory state to the SST, but not a participating member. The office of Missouri Governor Jay Nixon did not immediately return a call for comment.

 

Favorite