Florida, Pennsylvania, and Texas Weigh In on Trade Groups' Call for E-Fairness

ABA asks booksellers to write to their governors now

This week, Florida and Pennsylvania became the latest states to respond to a letter from the American Booksellers Association and seven other trade groups calling for the equitable enforcement of sales tax laws on online purchases. In addition, Texas continued a dialogue with ABA on the sales tax issue via a letter from the state's comptroller of public accounts.

The responses from the three states concurred with the independent trade groups' assertion that e-fairness is an issue, though they did not agree with the groups on the exact definition of nexus. ABA is urging booksellers in Florida, Pennsylvania, and Texas to write to their governors this week to drive home how important this issue is for in-state business owners.

"The in-depth responses from Florida, Pennsylvania, Texas, as well as a number of previous responses, clearly indicate that e-fairness has become a serious matter for these states," said ABA COO Oren Teicher. "We need to strike while the iron is hot. It is crucial that state officials hear from local business owners about this issue. The more businesses that write, the more powerful the message." Teicher also reminded booksellers who write to their governors to let ABA know by contacting Public Policy Liaison David Grogan at [email protected].

In her response to the trade groups' follow-up letter of January 18, Texas Comptroller of Public Accounts Susan Combs wrote: "We agree with the [ABA's] observation that sales and use taxes should be paid on all sales of taxable items delivered to Texans, including sales made by out-of-state Internet sellers. In addition, as indicated in your letter, the growth of e-commerce is at the expense of state revenues."

Combs reported that Texas receives more than half of its general revenue from sales tax, and, in fiscal 2006, lost an estimated $350 million in state sales tax on Internet sales, and an additional $191 million in state sales tax on mail-order sales. "As Internet usage and e-commerce increase, it is expected that the state revenue losses from remote sales will also increase," she continued, "thus reducing the amount of available revenues needed to provide services to the residents of the state."

The Texas Comptroller's Business Activity Research Team and Enforcement Division "routinely seek out and review the business practices of retailers nationwide to identify those companies that have established nexus in Texas and thus must collect sales tax." Combs noted that Texas is a participating member of the Streamlined Sales Tax Project. In conclusion, she noted, "We welcome the attention that your association has paid to this issue."

James R. Evers, program director, general tax administration, for Florida's Department of Revenue, wrote: "You bring up a national problem impacting all states that have a sales and use tax. It would be most helpful if the United States Congress would address the issue. We do recognize the state of Florida is losing millions of sales and use tax dollars because many Internet-based retailers and mail order companies do not register and collect sales and use tax."

Evers noted that several Supreme Court cases have defined nexus and the issue has been litigated in several states. "As you pointed out," Evers wrote, "there are many well known Internet companies that are related to companies with a presence in Florida and/or offer exchange or refund options with companies having a physical presence in our state." He added that there is pending 2008 legislation that, if enacted, would allow Florida to join SSTP.

In her reply, Lora A. Kulick, senior counsel for Pennsylvania's Department of Revenue, stressed: "The Commonwealth does require those retailers who sell online and also have the necessary connection with Pennsylvania to register with the Department, be licensed by the Department, and collect and remit the sales tax due on sales made to Pennsylvania residents." She pointed out that the state had started a Use Tax Voluntary Compliance Program to educate taxpayers and tax preparers about Pennsylvania Use Tax that is "due when a Pennsylvania business purchases equipment and supplies from out-of-state vendors or via the Internet, and sales tax is not collected and remitted by the seller."

ABA is asking booksellers in states that collect sales tax to let their governors know how important this issue is for business owners. As an example of how successful a letter-writing campaign can be, Teicher noted that booksellers in New York recently welcomed the news that New York state Governor Eliot Spitzer is seeking to clarify state tax law to ensure that out-of-state online retailers collect sales tax. In November, ABA CEO Avin Mark Domnitz and more than 30 New York booksellers had written to Governor Spitzer to call for the equitable collection of sales tax.

To date, 18 states have responded to the letter: California, Florida, Hawaii, Indiana, Iowa, Kansas, Louisiana, Maine, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Washington, West Virginia, and Wyoming. The letters and new responses can be found on ABA's Sales Tax Initiative Page.

The association has prepared a template letter that booksellers can easily adapt and send to their governors. To have the greatest impact, booksellers should mail a hardcopy of the letter on store letterhead to the governor's office. ABA is requesting that booksellers also fax a copy of their letter to the attention of David Grogan at (914) 591-2720, or to send it via e-mail to [email protected]. --David Grogan