It’s been more than a year since the state’s so-called Amazon tax went into effect, requiring all online retailers to remit sales taxes to the state. But so far the state’s been unable to collect revenue from it.
Revenue Services Commissioner Kevin Sullivan said the tax has brought no appreciable revenue to the state’s coffers. Sullivan made the comments Thursday before the governor’s monthly commissioners meeting where his budget secretary gave a presentation on the state’s current $365 million budgetary shortfall. The gap was caused in large part by declining revenue.
So far, the Amazon tax has been about as effective as Sullivan predicted it would be in April 2011, when he wrote to budget Secretary Ben Barnes. At the time, the Office of Fiscal Analysis was projecting a $9.4 million revenue bump as a result of the tax. Sullivan told Barnes not to expect the added cash because the tax was uncollectible.
Although people are required to pay a use tax for goods purchased online from companies in other states, the tax is ignored by most.
But following the passage of the Amazon tax bill, major online retailers like Amazon and Overstock.com pulled their business from affiliated companies in Connecticut.
So has the tax been a total loss? Not if you ask Tim Phelan, president of the Connecticut Retail Merchants Association. Phelan said that if nothing else, the tax has sent a symbolic message to brick and mortar stores who are at a disadvantage having to compete with online stores not charging sales tax.
“States like Connecticut have said ‘We don’t know what kind of impact this is going to have but goddamnit we’re going to do it because it’s not fair,’” he said. “. . . At least it’s sent a signal to Connecticut retailers that the state of Connecticut cares about them.”
But Sen. Andrew Roraback, the ranking Republican on the Finance, Revenue and Bonding Committee, said that while the tax sent a message, he wasn’t sure passing the bill was a fruitful exercise.
“I’m very sympathetic to my local bookstore. I want to help it succeed but I think we should help them by doing something constructive. If we’re sending messages that are ineffective, I’m not sure how constructive that is,” Roraback said.
Roraback said he thought the state had essentially thrown its hands in the air and given up on the tax and hoped Congress would pass a solution. Sullivan said both the state and federal government are pursuing avenues to resolve the situation.
The state is hoping to get major retailers to agree to collect and remit the tax. Sullivan suggested the state was currently in talks with one.
“Nothing will happen until we can get one of the major retailers to bite,” he said. “That’s as much as I can say right now.”
The other prospect would be an act of Congress. Sullivan said there have been a few pieces of legislation aimed at getting online stores to pay sales taxes to states. Though they have yet to pass, he said the lawmakers who were pushing the bills have been re-elected.
Gov. Dannel P. Malloy said Wednesday he expects Congress to act during next year’s legislative session, in part because of pressure created by laws like the Amazon tax.
“I believe and predict that there will be a resolution of that issue in this Congress as a result of what we and other states have done,” Malloy said. “When we have a global answer to this . . . I think it will be very good for brick and mortar retailers.”
Malloy said that if Congress acts quickly in its first few months, online sales tax may even be able help raise revenue during the next fiscal year when the state is projecting a $1.18 billion shortfall.
“If we can build it into our July 1 assumptions, there’s a plus side for us,” he said.