We now collect enough internet sales taxes to cut the tax rate
By Jonathan Johnson, Chairman of the Board of Overstock.com
Utah’s Gov. Gary Herbert and other internet tax proponents proclaim Utah’s uncollected e-commerce sales tax has reached $200 million a year. It’s a large number. And it’s largely wrong.
Supposedly, the shortfall results from out-of-state e-commerce retailers not collecting Utah sales taxes. But is $200 million the number right? It doesn’t seem to add up.
Here’s a back-of-the-envelope calculation of all 2016 e-commerce sales taxes due in Utah:
• The 2016 total U.S. retail e-commerce is $392 billion (estimates from Internet Retailer and eMarketer).
• Utah’s e-commerce visit share is 0.84 percent, based on the assumption e-commerce sales are proportionate to visits (Source: Hitwise and Connexity); coincidentally, that figure approximates Utah’s population proportion of about 0.9 percent.
• The average Utah sales tax rate is 6.53 percent (https://www.salestaxhandbook.com/utah).
• Therefore, Utah’s total e-commerce sales tax due — collected or not — would be $215 million: ($392 billion x .0084) x 0.0653 = $215 million.
If this calculation is correct, then either Utah is not collecting more than 90 percent of its e-commerce sales taxes, or the governor’s $200 million figure is wrong
