GAO: State and Local Governments Could Gain $8 Billion to $13 Billion from Internet Sales Tax

Chris Gaetano
Published Date:
Dec 19, 2017

The Government Accountability Office released a study saying that if all remote sellers were required to collect sales tax in 2017, state and local governments would have gained $8 billion to $13 billion, though there would also be increased compliance costs for certain businesses. 

The GAO estimates, based on an analysis of over 1,000 remote sellers, that large online retailers like Amazon have a sales tax collection rate of about 80 percent, versus retail platforms like Etsy, which collect only 14 percent of sales tax, and mail order catalogs, which collect 58 percent of sales tax. Based on these rates, it is estimated that if state and local governments were empowered to require all remote sellers of every type to collect sales tax, they would gain about $8 billion at the lowest and $13 billion at the highest. Higher-population states like California and Texas would get an additional $1 billion or so, while less populated states like Vermont and Wyoming would pocket about $20 million. The average gain for all states would be about $200 million. Such taxes, in their aggregate, would represent 2 to 4 percent of total state and local government sales tax revenues, which totaled $377 billion overall in 2016. 

The report also noted, though, that retailers would likely see higher costs if required to collect sales tax on all remote sales. Businesses would need to spend money on software that helps them collect tax in different states (with the GAO noting that the larger retailers already have this software, so the upfront cost will be higher for smaller companies), and would likely face increased legal and regulatory risk due to exposure to a larger number of tax jurisdictions. 

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