The U.S. Supreme Court is scheduled to consider a case next week (South Dakota v. Wayfair, Inc.) that has the potential to significantly improve states and localities’ ability to enforce their sales tax laws on Internet purchases.
Sales, Gas and Excise Taxes
Sales, excise, and gas taxes are an important source of revenue for states. The sales tax, in fact accounts for half of all state tax revenue. Forty-five states levy broad-based sales taxes, every state levies at least some type of tax on consumption, and all states have a tax on gasoline. But these taxes aren’t without problems.
Sales taxes are inherently regressive—requiring lower- and middle-income taxpayers to spend a larger share of their household budgets in tax than their wealthier neighbors. The gas tax provides funding for infrastructure, but many states have not modernized their gas tax, meaning it no longer raises adequate revenue. ITEP resources on sales, excise and gas taxes provide general and state-specific information about the mechanics of these taxes and options for reform.
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blog April 11, 2018 ITEP Resources on Amazon and the Online Sales Tax Debate
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blog April 11, 2018 What to Expect if the Supreme Court Allows for Online Sales Tax Collection
Online shopping is hardly a new phenomenon. And yet states and localities still lack the authority to require many Internet retailers to collect the sales taxes that their locally based, brick and mortar competitors have been collecting for decades.
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blog March 30, 2018 Amazon’s Local, State and Federal Tax Issues Explained
President Trump’s latest Twitter target, the Amazon Corporation, is now under the microscope for its state and local tax avoidance. In a Thursday tweet, the President claimed that “[u]nlike others, they pay little or no taxes to state & local governments.” Such a statement is a startling reversal for a president who previously said his own ability to avoid paying income taxes “makes me smart.”
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blog March 26, 2018 Amazon and Other E-Retailers Get a Free Pass from Some Local-Level Sales Taxes
A new ITEP analysis reveals that in seven states (Alabama, Alaska, Idaho, Iowa, Mississippi, New Mexico, and Pennsylvania), the nation’s largest e-retailer, Amazon.com, is either not collecting local-level sales taxes or is charging a lower tax rate than local retailers. In other states, such as Colorado and Illinois, Amazon is collecting local tax because it has an in-state presence, but localities cannot collect taxes from other e-retailers based outside the state.
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report September 14, 2017 State Tax Codes as Poverty Fighting Tools
Astonishingly, tax policies in virtually every state make it harder for those living in poverty to make ends meet. When all the taxes imposed by state and local governments are taken into account, every state imposes higher effective tax rates on poor families than on the richest taxpayers.
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brief September 11, 2017 Options for a Less Regressive Sales Tax in 2017
Sales taxes are one of the most important revenue sources for state and local governments; however, they are also among the most unfair taxes, falling more heavily on low- and middle-income households. Therefore, it is important that policymakers nationwide find ways to make sales taxes more equitable while preserving this important source of funding for public services. This policy brief discusses two approaches to a less regressive sales tax: broad-based exemptions and targeted sales tax credits.
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blog July 21, 2017 States May Be Finally Learning Their Lesson on Back-To-School Sales Tax Holidays
State lawmakers face a dilemma when it comes to sales tax holidays, an attractive and popular policy that nonetheless proves to be a poor choice compared to developing thoughtful, targeted tax policies or investing in well-executed public services. Luckily, word seems to be getting out that the costs associated with these holidays far outweigh their purported benefits.
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brief July 12, 2017 Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
Sales taxes are an important revenue source, composing close to half of all state tax revenues. But sales taxes are also inherently regressive because the lower a family’s income, the more the family must spend on goods and services subject to the tax. Lawmakers in many states have enacted “sales tax holidays” (at least 16 states will hold them in 2017), to provide a temporary break on paying the tax on purchases of clothing, school supplies, and other items. While these holidays may seem to lessen the regressive impacts of the sales tax, their benefits are minimal. This policy brief looks at sales tax holidays as a tax reduction device.
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blog June 28, 2017 Gas Taxes Will Rise in 7 States to Fund Transportation Improvements
Summer gas prices are at their lowest level in twelve years, which makes right now a sensible time to ask drivers to pay a little more toward improving the transportation infrastructure they use every day. Seven states will be doing this on Saturday, July 1 when they raise their gasoline tax rates. At the same time, two states will be implementing small gas tax rate cuts.
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brief June 28, 2017 How Long Has It Been Since Your State Raised Its Gas Tax?
Many state governments are struggling to repair and expand their transportation infrastructure because they are attempting to cover the rising cost of asphalt, machinery, and other construction materials with fixed-rate gasoline taxes that are rarely increased.
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brief June 28, 2017 Most Americans Live in States with Variable-Rate Gas Taxes
The flawed design of federal and state gasoline taxes has made it exceedingly difficult to raise adequate funds to maintain the nation’s transportation infrastructure. Thirty states and the federal government levy fixed-rate gas taxes where the tax rate does not change even when the cost of infrastructure materials rises or when drivers transition toward more fuel-efficient vehicles and pay less in gas tax. The federal government’s 18.4 cent gas tax, for example, has not increased in over twenty-three years. Likewise, nineteen states have waited a decade or more since last raising their own gas tax rates.
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blog May 12, 2017 South Carolina’s Gas Tax Deal: Could Have Been Worse, Could Have Been Better
South Carolina lawmakers this week raised the state’s gas tax for the first time in 28 years, a time period that tied for the third-longest in the nation. While the… -
blog May 10, 2017 Gas Taxes Increases Continue to Advance in the States
This post was updated July 12, 2017 to reflect recent gas tax increases in Oregon and West Virginia.
As expected, 2017 has brought a flurry of action relating to state gasoline taxes. As of this writing, eight states (California, Indiana, Montana, Oregon, South Carolina, Tennessee, Utah, and West Virginia) have enacted gas tax increases this year, bringing the total number of states that have raised or reformed their gas taxes to 26 since 2013. -
news release April 23, 2017 New Analysis: Average Alaskan Would Pay Less Under Income Tax Than Under Other Fiscal Options
Cutting the Permanent Fund Dividend (PFD) or Implementing a Sales Tax Would Be Costlier than Income Tax for Most Alaskans A new analysis by the Institute on Taxation and Economic… -
news release March 29, 2017 Gas Tax Trivia Apropos for April Fool’s Day
April 1 will mark the longest-running streak that the federal gas tax has remained stagnant, a short analysis from the Institute on Taxation and Economic Policy reveals. Saturday will mark… -
blog March 29, 2017 The April Fool’s Joke Is on Consumers: April 1 Marks Record-Breaking Procrastination on Federal Gas Tax Policy
It’s only appropriate that April 1 will mark a new milestone in foolish federal transportation infrastructure policy. On Saturday, the nation’s federal gasoline tax rate will have been stuck at… -
blog March 23, 2017 Taxing the Gig Economy
Our ever-changing economy demands that lawmakers update our tax laws to keep pace. Take, for example, the growth of online sales. As recently as six years ago, Amazon, the nation’s… -
blog March 21, 2017 Amazon Will Collect Every State Sales Tax by April 1
For decades, Amazon.com helped its customers dodge the sales taxes they owed to gain an advantage over its competitors. But as the company’s business strategy has changed, so has its… -
report March 15, 2017 Taxes and the On-Demand Economy
A growing number of Americans are getting rides or booking short-term accommodations through online platforms such as Uber and Airbnb. This is nothing new in concept; brokers have operated for hundreds of years as go-betweens for producers and consumers. The ease with which this can be done through the Internet, however, has led to millions of people using these services, and to some of the nation’s fastest-growing, high-profile businesses.
The rise of this on-demand sector, sometimes referred to as the “gig economy” or, by its promoters, the “sharing economy,” has raised a host of questions. For state and local governments, one of them is: How do the services provided by these companies fit into the current tax system? All three of the major categories of revenue sources relied upon by state and local governments, including consumption taxes, income taxes, and property taxes, are impacted to some extent by the on-demand economy. While Uber, Airbnb, and similar on-demand companies are still relatively small in relation to the overall U.S. economy (accounting for 0.5 percent of the U.S. workforce), they are large enough to have a meaningful impact on state tax collections, and their explosive growth and entry into new lines of business will amplify their importance in the years ahead.
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blog February 15, 2017 What to Watch in the States: Modernizing Sales Taxes for a 21st Century Economy
This is the fourth installment of our six-part series on 2017 state tax trends. The introduction to this series is available here. State lawmakers often find themselves looking for ways… -
report February 9, 2017 State Gasoline Taxes: Built to Fail, But Fixable
Every state levies taxes on gasoline and diesel fuel, usually just called “gas taxes.” These taxes are an important source of state revenue–particularly for transportation–but their poor design has resulted in sluggish revenue growth that fails to keep pace with state infrastructure needs. This ITEP Policy Brief explains how state gas taxes work, their importance as a transportation revenue source, the problems confronting gas taxes, and the types of gas tax reforms that are needed to overcome these problems.
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blog February 2, 2017 What to Watch in the States: Gas Tax Hikes and Swaps
This is the second installment of our six part series on 2017 state tax trends. The introduction to this series is available here. State tax policy can be a divisive… -
blog January 30, 2017 And Then There Were Six: Amazon Expands Its Sales Tax Collection
UPDATE: After this post was published, Amazon announced that it will begin collecting sales tax in Oklahoma on March 1. This post has been updated to reflect this development. The… -
blog January 25, 2017 47 Years Later, Alaska Considers Playing Catch-Up with its Motor Fuel Tax
Alaska Gov. Bill Walker recently proposed tripling the gasoline and diesel tax rates paid by Alaska motorists to generate funding for the state’s infrastructure. In a different state, tripling the… -
report January 25, 2017 Alaska’s Motor Fuel Tax: A National and Historical Outlier
Alaska Gov. Bill Walker recently proposed tripling his state’s motor fuel tax rates.[1] While a variety of fuel types would be affected by this proposal, three-fourths (or $60 million) of the revenue raised each year would come from higher taxes on gasoline and diesel fuel–sometimes referred to as highway fuels–purchased by Alaska motorists.
Absent any national or historical context, tripling Alaska’s gasoline and diesel fuel tax rates may sound like a radical policy change. But an adjustment of this size is necessary because Alaska lawmakers have not updated the state’s basic highway fuel tax rate since May 1970–almost 47 years ago.[2] Because of this inaction, Alaska’s highway fuel tax has become an outlier when compared to other states’ tax rates, or when compared to Alaska’s own history.
This brief discusses four ways in which Alaska’s highway fuel tax is an outlier: