Not all states would benefit from the Streamlined Sales and Use Tax Agreement, according to a study released yesterday by a think tank.
Created by the Streamlined Sales Tax Project last year, the SSUTA calls for tax collection regardless of nexus under a plan that would simplify state and local tax rates. It is supported by about 40 states, and state participation in the agreement is voluntary.
In “Taxation of Online Sales: Competing With the Streamlined Sales Tax Project,” economists Thomas M. Lenard and Stephen McGonegal of The Progress & Freedom Foundation found that not all states would benefit from the SSUTA.
“At least some states would not find it in their interest to participate in SSUTA,” they said in the report. “States that choose not to join may enjoy a potentially significant competitive advantage … in attracting Internet and other remote retailers because they will be able to sell tax-free. The new business attracted through a favorable tax policy will stimulate economic activity, job growth, incomes and tax revenues in the non-SSUTA states.”
On its Web site, the foundation bills itself as “a market-oriented think tank.” The foundation lists as its supporters companies such as Amazon, Cisco Systems, eBay, Microsoft, Motorola, The News Corporation Ltd., Time Warner and VeriSign Inc.
Results of the study suggest that “the potential beneficial effects of opting out are substantial.” Among the findings:
· 11 percent of remote sales ($123 billion of $1.15 trillion, based on 2001 data) would be affected by SSUTA adoption. Other sales are exempt or already taxed.
· If participation in the SSUTA is voluntary, 24 percent of the $123 billion in potentially affected sales ($29 billion) will shift to tax-free states (Alaska, Delaware, Montana, New Hampshire and Oregon) as well as other states that choose not to adopt SSUTA.
· Non-participating states would benefit from an increase of $80 billion in sales, $25 billion in earnings and more than 500,000 jobs due to multiplier effects.
· If Virginia opted out of SSUTA, it would avoid losing $2.4 billion in sales by Virginia businesses, $1.9 billion in personal income and 14,888 jobs due to the loss of remote sales by Virginia businesses. It also would gain a portion of sales shifted from SSUTA participants.
Lenard released the taxation study during a presentation to the Virginia General Assembly's Joint Subcommittee to Study the Impact of Collecting Sales Taxes on the Economy.
