Online sales costing Vermont millions in tax revenue

MONTPELIER — The state will take in another $8 million or so in annual sales tax revenue now that Amazon has agreed to collect and remit it, but the state will continue to miss out on about $13 million more from online purchases and mail orders, according to the Legislature’s Joint Fiscal Office.

Vermont’s sale tax must be collected from retailers who have a presence, or what is known as nexus, in the state. The state has tried without success in recent years to collect the sales tax for online purchases from retailers who do not have a presence in Vermont.

Vermont Tax Commissioner Kaj Samsom (Courtesy photo)

Vermont Tax Commissioner Kaj Samsom (Courtesy photo)

Amazon, the nation’s largest online retailer, began voluntarily collecting Vermont’s 6 percent sales tax this month. But plenty of other online retailers continue to sell goods to Vermonters without collecting the tax. Vermonters are supposed to pay the sales and use tax due on online purchases when they file their annual income tax returns, but only about 10 percent of filers report any tax due.

Because Amazon is a specific taxpayer, the Tax Department is not allowed to provide information about its sales in Vermont or how much tax it may end up remitting to the state.

Sara Teachout, a fiscal analyst with the Joint Fiscal Office, presented the House Ways and Means Committee with an estimate Wednesday, however, that is based on publicly available information. According to her estimate, Vermont is expected to see about $8 million in sales tax revenue in a full fiscal year from the online retail giant. That is based on estimated sales of about $148 million of taxable goods in the state.

Tax Commissioner Kaj Samsom told the committee Wednesday that Teachout’s estimate is “A-plus” work and suitable to be used by the committee for any discussions about addressing the collection of the state’s sales tax.

“We built our estimates for budgeting and internal purposes based on data that is kind of undeniably confidential taxpayer data. We look at the work Sara has done and … besides giving an A-plus I can say to the committee that that is good work that is worth basing thoughts and discussions off of,” Samsom said.

Gov. Phil Scott used the Tax Department’s confidential information about Amazon to estimate revenue used in his 2018 fiscal year budget.

Teachout further estimated that another $6.4 million in sale tax is due annually from online retailers other than Amazon. And another $7.4 million in sales tax is due from mail order business conducted in Vermont.

“I can’t believe mail order is still this big, but I came up with $7.4 million,” she said.

Overall, Teachout said the state should see an additional $21.8 million in revenue, including Amazon. That means the state is missing out on about $13.7 million when Amazon’s contribution is subtracted.

Samsom indicated that Teachout’s estimates were accurate.

“The $21.8 million sounds like a good number to me, as well, for looking at the overall universe here,” Samsom said.

The state has undertaken several efforts in recent years to collect sales tax for online purchases. The state is part of a streamlined sales and use tax agreement with a number of other states intended to make collecting sales tax easier for retailers. The state also includes a section on state income tax forms where Vermonters are supposed to declare what they owe for online purchases. More recently, the state passed a law that will take effect July 1 that requires online retailers to informer Vermonters how much tax they owe the state if the retailer does not collect the tax itself.

“This Legislature and many others have been concerned about collecting the sales tax on remote sales. It’s a compliance issue. Sales tax is due, but because the vendors do not have nexus with the state of Vermont, or at least say they don’t have nexus with the state of Vermont, they haven’t been collecting the sales tax,” Teachout told the committee.

Samsom said if all Vermonters who file a Vermont income tax return paid what they owe for online purchases the state would take in about $28 million. Only about $3 million is collected, he said.

Rep. Sam Young, D-Glover, the vice chairman of the committee, said the committee is not planning to take any immediate action but will monitor developments when the notification law takes effect in July.

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