December 15, 2011, 11:03 AM

Sales tax void could spoil the holidays for Ohio stores

They’ll lose $137 million in sales to online rivals, the University of Cincinnati says.

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Store retailers in Ohio stand to lose $137 million in holiday sales this year, and Ohio state and local governments will forfeit $45.7 million in sales tax revenue, because of “sales tax inconsistencies” that favor out-of-state online retailers who don’t charge sales tax, according to a new study from the University of Cincinnati’s Economics Center. The study was commissioned by the Ohio Council of Retail Merchants, a trade organization whose members include about 3,600 companies involved in the retail industry, including merchants and product suppliers.

The study follows a report the Council released last month projecting that overall fourth quarter retail sales in Ohio will increase 3.31% this year over last year’s holiday season. The new study contends that that increase would be much larger if all online retailers were required to collect sales tax. "If the playing field is leveled, Ohio retailers would see an additional increase of $137 million in sales this holiday season and over $600 million annually," says Jeff Rexhausen, associate director of research at the University of Cincinnati Economics Center.

Some members of the Council complain that consumers are using their stores to touch and feel products before buying online. "Often times a customer will walk into our showroom, browse our jewelry selection, and walk out only to go buy a similar item tax-free on the Internet," says Jack Seibert, owner of Jack Seibert Goldsmith & Jeweler in Columbus.

Other sales tax impact studies have offered a mix of projections. A study by the University of Tennessee has projected that states with sales tax laws would take in an additional $23.3 billion in sales tax revenue next year if all online and catalog retailers were required to collect sales tax and remit it to states. That figure includes $11.4 billion from online sales and $11.9 billion from catalog sales.

But a study conducted for NetChoice, an organization backed by online retailers opposed to sales tax, has projected that states would take in only $4.7 billion in sales tax revenue from web sales.

Steve DelBianco, executive director of NetChoice, however, says the new projection from the University of Cincinnati appears to be more accurate than an earlier Ohio study by the University of Tennessee. “Their estimate is much more realistic than the University of Tennessee 2012 estimate that Ohio would miss out on $308 million in sales tax,” he says.

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