Ohio rakes in $45 million in online taxes

State hopes to eventually tap into estimated $308 million of tax revenue from online sales
Associated Press
Jul 21, 2014

Online sales tax collections have hit an all-time high in Ohio this budget year, reaching $45 million, a 68 percent increase over the past five years.

The money continues to pour in this year after Ohio officially joined a multi-state effort to streamline sales tax for online purchases in January. The Ohio Department of Taxation estimates that the state stands to eventually tap into an estimated $308 million worth of tax revenue from online sales.

Still, Ohio doesn't have legal authority to collect from online retailers who don't have a physical location in the state, such as Amazon, which operates its closest warehouse in Hebron, Kentucky.

The result: Many buyers don't get charged sales tax on millions of dollars' worth of purchases.

While buyers save money, local businesses say the practice hurts them because bargain hunters will turn to online retailers that don't charge taxes, especially for big-ticket items.

Local governments say even though the state is collecting more online sales taxes than ever, the municipalities still are missing out on taxes that could help pay for paving crumbling roads and prosecuting criminals.

"It really puts the state in a position that you have to either raises taxes because you have a revenue source that people aren't paying or you cut the budget where you can," Craig Johnson, the executive director of the Streamline Sales Tax Governing Board, told The Dayton Daily News.

Johnson said that if every seller was required to tax, then the playing field would be leveled for businesses nationwide.

"You're really taking tax out of the equation," Johnson said. "Don't let the government pick the winners and losers based on if you don't have to collect sales tax or you do have to."

In the state's fiscal 2014-2015 budget bill, lawmakers included an Internet sales tax for transactions between residents and out-of-state companies, but Gov. John Kasich vetoed it.

A spokesman for his office said Kasich was concerned about the legality of imposing such a tax on out-of-state retailers and wants to see a federal solution to the problem, instead.

The right to regulate interstate commerce lies with the federal government, said the governor's veto explanation.

"Without some kind of federal action that's going to require these remote sellers to come forward, register and collect, we're not going to be able to force them to do it," said Phyllis Shambaugh, legal counsel for Ohio's sales tax division.

 

Comments

CommonsenseNow

If there is no nexis, you cannot force online retailers to collect, Phyllis. And let's follow your suggestion, FORCE online retailers to collect that have no nexis in the state, and run half of them out of business because of the compliance costs of collecting sales tax for the entire country. Then we'll just have left the giants who are pushing for this crap, like Amazon ... and we'll be left with big business in bed with big government.

CUT THE BUDGET instead. But then again you have all those unfunded pension liabilities, don't you?

sugar

It's all about putting tax payers through the wringer.

tk

I buy online occassionally when I can't find something I need locally. Online shopping is especially good for finding parts you need to repair something rather then replacing it. Even if there is no sales tax, you really aren't saving after shipping and handling costs are added.

ladydye_5

I think a lot of it goes after the "Cyber Monday" shoppers. There are deals for free shipping, great deals, and no tax if it is from out of state suppliers. It really adds up to savings for the consumer and a loss of revenue for the state. And I would really like to know who honestly answers the question on the state tax from for the exact dollar amount they spend for those purchases. Do you honestly and voluntarily pay that at the end of the tax year?

CommonsenseNow

The larger point here is THERE IS A REASON WHY you have to have nexis in state for that state to HAVE ANY JURISDICTION over you including FORCING you to withhold sales tax. Having a customer buy your stuff is NOT SUFFICIENT jurisdiction. This would change a lot of rules and NOT in a good way. Freaking cut the budget.

ohioengineer

Here's an incredible thought: let's put all businesses and taxpayers on an equal footing by eliminating the sales tax completely! If there is no sales tax, there can be no winners or losers and think of all the red tape and money that can be saved in the process.

Of course, this will never happen as long as we have an ever-growing, hungry government machine to feed. Rather the sales tax rate will continue to creep up over time and the government will figure out how it can be applied to even more items. (Remember when services weren't taxed?) Nothing is certain but death and taxes.

JACKEL

I buy from Amazon alot. I thought I was paying Ohio tax already. I know I pay Netflix,they told me Ohio was one of the few collecting !

CommonsenseNow

It depends if it has been proven they already have nexus with the state. That is the test. If they have a physical presence (such as an office) or more than de minimis economic presence such as service team, sales team, independent contractors, etc, they can be proven to have nexus. There is a lot of case law on this because it deals with interstate commerce it falls under the Commerce Clause and Due Process clause. State and local tax law can be a complicated area.

DGMutley

The Marketplace and Internet Tax Fairness Act is the proposed act in congress which will grant states authority to collect sales taxes from brick and mortar stores in other states that sell to residents of their state.

How can that be? How can Ohio, for example, require a Michigan business to collect Ohio sales tax on purchases made by Ohio residents? -- by congress passing this legislation.

This is a greedy tax proposal from the states' view--it allows states to tax their residents' most popular buying spots outside of their states.

It's conceivable under this act that a popular retailer could have millions in sales and not have any or very little sales subject to it's own state's sales tax.

A better tax proposal is for businesses to simply collect their state's sales tax on all sales regardless of where the purchaser resides. An example would be if you live in Michigan and purchase from a store in Ohio you would pay Ohio's state sales tax.

CommonsenseNow

Ohio has ZERO jurisdiction over a Michigan resident who has no presence in the state. Let's keep it that way. Also, if the government unions and welfare recipients would take a cut, our state budgets would not be a problem. Ohio says it has a balanced budget - but they don't add in the $5 billion unfunded pension liabilities. Hell, I don't have a pension, why should I pay for some government worker to have one? When government can't reform their spending ways, they crack down on compliance and taxes. Where will it end.