Cyber Shopping = Raw Deal for States

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Shoppers and state governments are both likely still recovering from "Black Friday" and especially "Cyber Monday," but for very different reasons. Consumers may be able to get great deals online, but state governments are losing necessary revenue. As the New York Times recently opined, "Online retailers who do not collect sales tax enjoy a significant and unfair advantage over rivals who must add the tax to their prices. They also cost the states billions of dollars a year in lost sales tax revenue -- money that cash-starved states cannot afford to forgo."

Wisconsin's Department of Revenue estimated that the state is losing $150 million a year on items sold online and this number is only likely to grow. Consumers are required to pay sales tax on items purchased online when they file their state income taxes. But in reality most consumers don't bother, and the U.S. Supreme Court has found that the constitution bars states from requiring most out-of-state catalog and online retailers from collecting sales taxes. But the court also said that Congress could step in to give states permission to do this, as explained in ITEP's Policy Brief on efforts to collect sales taxes on internet purchases.

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