Kudos to those who “Shop Local” – it’s good for the local economy & local government!

With city sales tax revenues expected to continue to decline, we urge you to shop local so your sales taxes and the other money generated stays within the local economy. We offer our thanks to those who do, as well as to those Illinois residents who pay the sales tax on their annual income tax returns!

The issue is that, unless the retailer has a presence (brick-and-mortar, warehouse or fulfillment center) in Illinois, the consumer pays NO sales taxes for Illinois, and that includes local governments. It is estimated that, in 2012, Illinois’ share of uncollected retail sales tax from online sales was around $506.8 million.

Illinois Issues feature story

Excerpts from an October 10 feature at Illinois Issues by Mary Hanson, Illinois Issues: Cities Lose Out On Retail Tax As Online Shopping Booms:

Allowing state and local governments to collect sales tax on all online purchases would close a loophole and level the playing field with brick-and-mortar stores, the argument goes. But many online sellers worry current proposals would mean onerous collection requirements that could put small sellers out of business.
The capital city experienced local sales taxes decline by $1.3 million last fiscal year. And it’s seeing another decline this year. McCarty says that’s exacerbated by the state imposing a fee to collect local sales taxes on behalf of cities. The fee was meant to help the state balance its budget passed in July, according to budget negotiators at the time.
McCarty says he hopes the federal government will change the rules so states and cities can collect taxes from online purchases. “Communities, all communities, would share in the taxes generated from online sales. Right now, Springfield doesn’t get anything.”

Solutions not likely to come soon

While several solutions to local city collection of sales taxes from online sales are possible, it’s unlikely any of them will happen soon:

  • Provide clear guidance about the definition of online retailers’ status of having a presence in a state or not.
  • Successfully challenge the 1992 Supreme Court decision that established the physical presence requirement for sales tax collection and remove the physical presence requirement.
  • Congress could pass legislation to allow states and local governments to collect sales tax on online purchases made from all out-of-state vendors. The MFA (Marketplace Fairness Act), passed the U. S. Senate in 2013, failed to get a vote in the House of Representatives.

Online retailers, especially smaller companies, need clear guidance and the ability to follow the often complex and multifaceted sales tax rules without spending more than they are making.

Consumers can help by shopping local

Meanwhile, we urge consumers to do their part by buying local whenever possible – and claiming sales tax purchases on their Illinois tax returns.

Read the full story at Illinois Issues: Cities Lose Out On Retail Tax As Online Shopping Booms…