September 12, 2005, 12:00 AM

$4.4 billion in sales tax at stake in online and catalog sales, study says

States will lose to retail e-commerce and catalog sales this year an estimated $4.41 billion in uncollected sales tax revenue, a figure that will grow to $6.84 billion by 2008, according to a study by the University of Tennessee.

 

States will lose to retail e-commerce and catalog sales this year an estimated $4.41 billion in uncollected sales tax revenue, a figure that will grow to $6.84 billion by 2008, according to a study by the University of Tennessee.

When factoring in b2b sales, which account for the lion’s share of e-commerce, the lost-tax-revenue figures rise to a range of $18 billion to $22.81 billion this year and $21.54 billion to $33.68 billion by 2008, the study says.

The university’s Center for Business and Economic Research, which conducted the study, used forecasts of e-commerce sales from Jupiter Research Inc. and applied an average combined state and local sales tax rate of 6.5%.

The uncollected sales tax stems from interstate sales for which neither retailers nor consumers collect or pay sales tax, usually in situations where a retailer has no physical presence in the buyer’s state. Starting Oct. 1, 18 states will begin operating under the Streamlined Sales Tax and Use Agreement, or SST, a program designed to make it easier for merchants to collect sales tax.

 

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