Sales tax Revenue How can states and localities develop reasonable estimates of
ID: 2376634 • Letter: S
Question
Sales tax Revenue
How can states and localities develop reasonable estimates of sales tax revenue given the increased popularity of buying goods on line and from remote sellers who are not required to collect sales tax? What relationship does this have to the budget.
Escheats
Fred Jones deposits $100 in a savings account for his grandchild Johnny upon his birth. Unfortunately Johnny%u2019s parents move frequently during his childhood and eventually they lose track of this account and forgot about it. The state escheats the bank account, which has grown to $122 due to inactivity for the past 7 years (no deposits or withdrawals). What type of revenue is this and how would the state record this transaction.
Detailed answer-MBA level
Explanation / Answer
Why is there no online sales tax now?
Until now, online shoppers have enjoyed buying items from e-commerce sites mostly sales-tax free. That's because older laws require stores to collect sales tax only on goods shipped to states where they have a physical presence, such as a distribution center or a physical store.
The primary reason for not requiring sales taxes for products sold across state lines is that it was just too complicated. Having to juggle the various sales tax laws and amounts for all 45 states that have sales tax was seen as a burden on businesses.
States that collect sales tax often have different rates depending on the type of goods being sold. Alcohol might have a higher sales tax rate while some goods like groceries dental equipment can be tax free. Within a state, cities and counties can charge additional taxes.
What's changed?
The most recent Supreme Court ruling that addressed the issue was in 1992, when Internet commerce was non-existent and computer software not as advanced.
Advocates for the online sales tax argue that current technology makes it possible to simplify and automate the task of collecting sales taxes for various states. Under the Marketplace Fairness Act, state governments that want to collect the tax will have to provide companies with free software for calculating taxes and set up one state entity to receive the payment.
Wait, aren't we required to pay sales tax already?
In most states with sales taxes, people who buy goods online (or over the phone or through the mail) from another state are subject to a Use Tax. They are supposed to keep track of everything they purchase and pay sales taxes when they file their tax return. Many consumers either ignore or are not aware of these requirements, and states say it is difficult to enforce.
Because people are already technically required to pay for unpaid sales tax, proponents of the bill argue that it isn't a new tax at all but a more efficient way of enforcing existing tax laws.
How much money will this bring in?
There were $225.5 billion in online sales in 2012, according to the U.S. Department of Commerce. States lost out on a combined $23 billion in uncollected sales tax revenue, according to estimates from the National Conference of State Legislators.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.