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Oppose Tax Hikes on Online Shopping!
An Open Letter to the Oklahoma Legislature
May 26, 2010
On behalf of the National Taxpayers Union's (NTU's) 4,700-plus members in Oklahoma, I urge you to oppose any legislative proposal that would require out-of-state online retailers to report or collect sales taxes from customers.
States that have attempted to prey upon online retailers beyond their borders – either through sales tax reporting on Internet transactions or the creation of "affiliate nexus" schemes – have not raised the desired revenues. In fact, New York officials report that the state's online affiliates tax has not yielded any revenue. Additionally, Rhode Island administrators say that their treasury has actually lost revenue following enactment of the tax. Now, New York is mired in litigation over its tax and Rhode Island is considering repeal. Several online retailers have also announced their intention to terminate their relationships with affiliates in Colorado due to its sales tax reporting requirement for online transactions.
A loss of business activity is the last thing any state needs during this time of economic uncertainty. In practice, these tax schemes force higher prices on consumers, or even precipitate business closures. Rhode Island has experienced a decline in tax collections because online retailers have severed ties with affiliates in the state rather than pay the tax.
Instead of looking for "creative" ways to raise taxes, Oklahoma should look for ways to reform taxes and continue to reduce spending. Elected officials have been wise to pare back spending to close a $500 million budget gap for the next fiscal year, and can continue to make further progress down this prudent path. Additionally, Oklahoma's combined state and local sales tax rates are the fourth-highest in the nation, surpassing those in New York and New Jersey, according to the Tax Foundation. Oklahoma should explore ways to reduce this burden on taxpayers and attract business, not add levies that will only make it worse.
For the foregoing reasons, please do what's right for Oklahoma and vote against any plan that would compel out-of-state online retailers to report or collect sales taxes.