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Watch VideoOnline shopping costs local government sales tax revenue
Story By: Rachel Hoffenberg
Source: KOAA
The U.S. Census Bureau says each year, more and more people are doing their holiday shopping on the internet. But is online shopping hurting our local economy? Experts agree that buying from online retailers means local government is losing sales tax revenue and in turn services. But one economist says there could be an upside for consumers.
Colorado College's assistant professor of economy, Daniel Johnson, says when a customer buys from an internet retailer that is not based locally, they do not pay a local sales tax. "For every sale made to a Colorado customer who is not paying sales tax, Colorado is losing tax revenue. No question about it."
The city of Colorado Springs estimates this holiday shopping season, consumers will spend 45 million dollars online. That could translate into a potential loss of 1 million dollars in sales tax revenue. Candice Bridgers, the Sales Tax Manager, says "Since our general fund is funded by sales tax revenue, it could be used for any of the general services that the city provides. Like police, or fire, or streets."
The city says that money could pay for 14 new police officers with equipment, 3 new fire engines, or 4 large dump trucks and snow plows. But Johnson says that even though the city may be missing out; "Customers on the other hand, may feel that they're getting a bit of a bargain. They don't pay as much in tax revenue, so they have more dollars in their pocket. And presumably, they'll spend those on things that make consumers happy."
If an online retailer has a store based locally, they do charge a local sales tax. But customers who buy from "online merchants only" are supposed to pay a use tax. However, Johnson says at this point in time, there is no way to track those sales or to see if customers are actually paying those taxes.
