One might imagine that with a $500 million budget shortfall for the upcoming year and the strong likelihood of chronic shortfalls for years to come, Oklahoma legislators would not want to jeopardize millions in annual state and local tax revenue paid by out-of-state retailers. Yet that is precisely what a majority of House members did recently in using the phantom threat of new taxes to vote down legislation (SB 744) implementing a minor technical revision to the Streamlined Sales and Use Tax Agreement (SSUTA).

The SSUTA has its origins in Supreme Court rulings that restrict the ability of states to collect taxes from remote retailers who sell by mail order, phone or over the Internet if the seller lacks a physical presence, or nexus, in a state.  As more commerce is conducted through remote sellers, the Supreme Court’s rulings have had an increasingly adverse fiscal impact on states and municipalities, as well as putting locally-based brick-and-mortar operations at a competitive disadvantage (see our discussion here). Read the rest of this entry »

One measure adopted this session to mitigate the extent of budget cuts was HB 2359, which aims to increase the collections of taxes owed on purchases made over the Internet or by other remote retailers. After opposition emerged, the final enrolled version of the bill dropped a controversial provision that would have required online retailers to report annual sales by each customer to the Tax Commission. Michael Mazerov, a Senior Fellow at the Washington-based Center on Budget and Policy Priorities, is one of the leading national experts on state taxes and a staunch proponent of state efforts to collect taxes on remote sales. He discussed Oklahoma’s new bill, which awaits final action by the Governor, in a phone interview with OK Policy’s Director, David Blatt.

David Blatt: Remind us of why a bill like HB 2359 is needed? What’s the problem that this legislation is trying to address?

MM: Legislation like this is needed because, like every state with a sales tax, Oklahoma is losing a significant share of revenue because it can’t collect sales taxes from many purchases made from internet sellers, catalog companies, and other so-called ‘remote sellers’. In fact, the best estimate is that Oklahoma is losing over a hundred million dollars a year in potential sales tax revenue from uncollected taxes on remote sales. This is revenue that is already due under existing state law. The state’s failure to collect this revenue makes its budget gap that much bigger and undermines the ability of state and local governments to maintain basic public services. It also makes the sale tax more regressive because most of the people that are avoiding paying this tax are relatively affluent people who have computers and Internet access account and can buy things tax-free online, while low-income people have to pay tax when they shop in stores. Read the rest of this entry »

As Oklahoma faces record budget shortfalls, the threat of massive cuts that would slow the state’s economic recovery and, in the Governor’s words, “have irreparable and damaging effects on our state services infrastructure,” looms large. This post is the third in a series that discusses some of the most promising policy ideas for a balanced approach to closing the budget deficit that includes new revenue sources.  Previous entries examined the vendor sales tax discount and the deduction for state income taxes.

The sales tax is the single largest revenue source for state and local governments in Oklahoma, providing more than one out of every four dollars that helps pay for such core public services as school teachers, police officers, environmental protection, and medical care. When purchases of taxable goods are made in-state, sales tax is collected directly by the retailer. When purchases are made of the same taxable goods out-of-state – whether via the Internet, catalogs or other sellers – taxes, in this case known as a use tax, are still legally owed by the purchaser. However, as a result of a pair of Supreme Court cases, the most recent of which was Quill vs. North Dakota, retailers who lack a physical presence, or nexus, in a state can not be required to collect and remit use tax owed to the state.  That has meant that an online retailer like Target.com, which has brick-and-mortar stores in Oklahoma, collects sales tax on online purchases from Oklahomans, while other online retailers, like Amazon.com, do not. Read the rest of this entry »