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Christie’s Quest To Tax Internet Sales Could Eventually Reap $300 Million

Former Florida Gov. Jeb Bush, who agreed with Christie that Internet sales should be taxed the same as “brick and mortar” store sales, said any online revenue increase should be used immediately to reduce other taxes. That’s what Wisconsin Gov. Scott Walker pledged to do, announcing that he would immediately apply the $95 million his state would collect in Internet sales tax if the federal bill passed to reduce income taxes.

Walker, whose crackdown on public employee pensions puts him in direct competition with Christie for that slice of the GOP primary vote, currently has a $540 million income and property tax cut heading through his GOP-controlled Legislature as part of his FY2015 reelection budget, while the scandal-battered Christie surprised political analysts by not renewing his call for an income tax cut in his budget speech last week.

Ironically, Christie’s use of $68 million in Internet sales taxes to shore up his budget, coupled with his complaint that pension and retiree health benefits costs for public employees were eating up 94 percent of the revenue increase in New Jersey’s budget, inadvertently underscored Norquist’s argument last spring that the drive for Internet sales tax revenue by governors was “all about raising money to pay unionized state and local government workers more money and more pensions.” including $70 million to be raised by requiring businesses in the state’s 35 Urban Enterprise Zone cities to pay the 3.5 percent UEZ sales tax -- is vital.

Holub, who heads the New Jersey Retail Merchants Association, said the $28 million estimate from requiring out-of-state Internet retailers to collect sales tax from its New Jersey customers “definitely seems lower than what we would anticipate,” although Treasury officials are probably factoring in a relatively low compliance rate for the first year of the program, given that New York and New Jersey are among just a handful of states currently trying to collect the tax.

He noted that a study by a team from Rutgers University’s Edward J. Bloustein School of Planning and Public Policy led by economists Nancy Mantell and Joseph Seneca forecast that New Jersey could collect $310 million in online sales tax revenue by 2015, up from $170 million in 2009.

“The conventional wisdom is that the potential revenue is in the hundreds of millions of dollars – 300 or 400 or 500 million,” Holub said. “It’s a number that’s going to get bigger every year because we’re seeing double-digit growth every year in online sales, and we’re not seeing that for bricks-and-mortar stores.”

Holub said he was gratified that the U.S. Supreme Court in December decided not to hear a challenge to a March 2013 ruling by the New York Court of Appeals that upheld the right of the Empire State to require the collection of sales taxes from online companies that maintained affiliated independent websites in New York that linked to their main company websites in exchange for commissions. “If a vendor is paying New York residents to actively solicit business in this state, there is no reason why that vendor should not shoulder the appropriate tax burden,” the New York appellate judge wrote.

The U.S. Supreme Court’s decision to pass on the case gave Christie and Sidamon-Eristoff sufficient confidence to include $28 million from Internet sales taxes to be collected by out-of-state retailers in their FY2015 budget.

Holub said he was also encouraged by the decision of the House Judiciary Committee to hold a hearing on the federal Marketplace Fairness Act, whose passage by the Republican-controlled House -- while still an uphill fight -- would permanently “create a level playing field between brick-and-mortar retailers and online sellers.”

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