Increased online sales deliver no (much-needed) taxes to states
Buyers of products from out of state are expected to pay Use tax since retailers were given a break by the Supreme Court in that they don't have to charge and collect sales tax on any sales to states where they don't have a physical presence since that would be too much of a burden. However, according to this New York Times story (registration required) few buyers pay the appropriate sales or use tax causing state budgets to fall into even greater deficits.
Forecasters say the states may come up short next year by as much as $80 billion, which would create the biggest state budget crisis since World War II. A merry holiday season in cyberspace, meanwhile, has pumped up the receipts of online retailers — to $78 billion last year, according to Forrester Research, an increase of more than 50 percent over 2001.
That does not count the larger categories of business-to-business online sales and catalog sales, for which sales tax is generally not collected. A study by the University of Tennessee estimates that sales tax is not collected on $234 billion in online business-to-business commerce. And tax on most of what the Direct Marketing Association estimates at $125 billion in annual catalog sales is not collected, either.