sales taxation and e-commerce · october 7, 2013 15 ! large states – home state effect ! policy...
TRANSCRIPT
October 7, 2013
Sales Taxation and E-Commerce
Presented to FTA Tax Estimating Conference
William F. Fox University of Tennessee
Outline
October 7, 2013
2
¨ Sales tax erosion ¨ Nexus and e-commerce firms ¨ Federal and state efforts to collect
the tax
Personal Income and General Sales Tax Revenues as Shares of Total Tax Revenues
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0% 19
70
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Shar
e of
Tot
al T
ax R
even
ue
Personal Income Share of Total
General Sales Share of Total
October 7, 2013
3
4
STATE GENERAL SALES TAX COLLECTIONS AS A PERCENT OF GDP
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Percent
October 7, 2013
NUMBER OF SALES TAX RATE CHANGES
0
2
4
6
8
10
12
82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Nu
mbe
r of
Ch
ange
s
Decreases
Increases
5 October 7, 2013
STATE SALES TAX BASE AS A PERCENT OF PERSONAL INCOME, 2010
Greater than 38.0% --13--
33.0% to 38.0% --15--
Less than 33.0% --17--
No sales tax --5--
U.S. = 33.0%
6 October 7, 2013
Sales Tax Base as Percentage of Personal Income, 1979-2012
30.0%
35.0%
40.0%
45.0%
50.0%
55.0% 19
79
1980
19
81
1982
19
83
1984
19
85
1986
19
87
1988
19
89
1990
19
91
1992
19
93
1994
19
95
1996
19
97
1998
19
99
2000
20
01
2002
20
03
2004
20
05
2006
20
07
2008
20
09
2010
20
11
2012
Sale
s Ta
x Ba
se a
s Sh
are
of P
erso
nal I
ncom
e
October 7, 2013
7
8
CAUSES OF CHANGE IN THE SALES TAX BASE
¨ Legislated Exemptions ¤ Fairness - Food, Clothing ¤ Economic Development - Holidays, Location
¨ Changes in Consumption Patterns ¨ Cross Border Shopping
¤ Mail Order ¤ Driving Next Door ¤ E-Commerce
October 7, 2013
ESTIMATED TOTAL E-COMMERCE SALES
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Billi
ons
Total Business to Consumer (B2C)
Total Business to Business (B2B)
*Sales-taxing states only.
October 7, 2013
9
0
1
2
3
4
5
6
Walmart OfficeMax Best Buy QVC Systemax Netflix Amazon
Jobs
per
$m
illio
n sa
les
Employment/Sales, 2009 Selected Firms
October 7, 2013
10
Taxation of remote sales
October 7, 2013
11
¨ Quill v. North Dakota ¨ Weak use tax compliance ¨ Consumers very responsive to the no
tax option
October 7, 2013 12
2010 2011 2012 2013 2014 2015
Baseline E-‐Commerce Growth ScenarioTotal Business-‐to-‐Business E-‐commerce 2,846,701 3,182,517 3,466,547 3,835,835 4,427,560 5,126,858Total Business-‐to-‐Consumer E-‐commerce 244,000 280,892 314,378 356,684 421,287 498,221Total E-‐Commerce 3,090,701 3,463,409 3,780,925 4,192,520 4,848,848 5,625,078
Estimated Taxes Due 37,823 42,384 46,270 51,307 59,339 68,838Estimated Taxes Collected 28,512 31,891 34,752 38,470 44,421 51,455
Estimated Total State and Local Revenue Loss 9,311 10,494 11,518 12,837 14,918 17,383
Sales Tax Nexus among Online Retailers
Top 1,000 Ranking Group
Number of Retailers in the Nexus
Data
Average Number of
Nexus States
Average Share of National State/Local Sales Taxes among
Nexus States 1-99 65 29.4 69.6%
100-199 36 19.1 48.0%
200-299 39 18.9 52.7%
300-399 37 16.2 46.2%
400-499 41 6.0 18.2%
500+ 13 2.8 10.9%
13
Distribution of Nexus States among Online Retailers
Number of States for which Sales Taxes Are Collected
Number of Online Retailers
0 8 1 57 2 22 3 12
4-10 25 11-24 17 25-44 52
45 38
14
Determinants of States Where Firms Have Nexus
October 7, 2013
15
¨ Large states – Home state effect ¨ Policy Effect:
¤ Higher tax rates discourage nexus in larger states ¤ Broader sales tax bases discourage nexus in larger
states ¤ But, policy variables will have less effect than size of
state
¨ Spatial effect: firms consider whether they have nexus in nearby states
State efforts to collect on remote sales
October 7, 2013
16
¨ Working together- SSUTA ¨ Expand nexus definition
¤ Ownership affiliate nexus ¤ Attributional nexus ¤ Amazon laws
¨ Enhance use tax collection – line on income tax return
¨ Reporting requirements ¨ Support federal legislation
Federal legislation
October 7, 2013
17
¨ Marketplace Fairness Act of 2013 ¨ Passed the Senate ¨ $1.0 million small seller exception ¨ Simplifications:
¤ providing firms with advance notification of sales tax rate changes
¤ using a single tax collection agency for both state and local sales taxes
¤ creating a uniform sales tax base for the entire state ¤ using destination sourcing ¤ providing free sales tax compliance software ¤ relieving remote sellers of any liability associated with incorrect
compliance because of errors made by a certified software provider.
Percent of Total Estimated American Online Retail among the Top Retailers
Firm Sales Range Total Sales Volume Percent of National Total
Top 10 > $2.7 billion $58.4 billion 24.1%
Top 25 > $1.2 billion $84.4 billion 34.9%
Top 50 > $440 million $100.6 billion 41.6%
Top 100 > $189 million $115.0 billion 47.5%
Top 250 > $49.9 million $129.1 billion 53.3%
Top 500 > $13.3 million $135.8 billion 56.1%
Top 750 > $5.0 million $138.0 billion 57.0%
Top 974 > $1.0 million $138.7 billion 57.3%
18
Estimates of the Number of Retailers with Sales above Various SSE Thresholds
Sales Threshold
Sellers Above the Threshold
Malowane and Siwek (2012)
Number Fraction Number Fraction
$150,000 12,114 0.24% 50,000 1%
$250,000 7,269 0.15% 30,000 0.6%
$500,000 3,634 0.07% 15,000 0.3%
$750,000 2,423 0.05% 10,000 0.2%
$1,000,000 1,817 0.04% 7,500 0.15%
19
Top 1,000 Online Retailer Primary Sales Categories by Size Category
<$5m $5-20m $20-100m
$100-500m
≥$500m
Apparel/Accessories 16.6
22.2
28.4
35.4
16.7
Computers/Electronics 6.9 7.5 9.9 5.3 21.4
Housewares/Home Furn. 17.0 11.1 12.1 3.5 2.4
Mass Merchant 0.8 3.0 4.2 7.1 28.6
Sporting Goods 8.9 11.4 7.2 2.7 2.4
20
Top 1,000 Online Retailer Characteristics by Size Category
<$5m $5-20m $20-100m $100-500m
≥$500m
Age of Retailer (years) 8.4 10.5 12.3 13.2 14.4
Average Online Sales ($million)
$2.8 $10.8 $46.3 $221.9 $2,313.4
2010-11 Online Sales Growth
32.8 21.3 19.8 20.0 20.5
Retail Chain 15.4 17.7 33.7 34.5 52.4
Web Only 63.6 59.3 37.5 31.9 16.7
21
October 7, 2013 22