SC's online shoppers shrink sales-tax income
Dec 18, 2012 (The State (Columbia - McClatchy-Tribune Information Services via COMTEX) --
SC shoppers need to spend lots of money in December and January for the state to meet its projected sales tax collections for this year -- money that accounts for more than a third of the state's nearly $7 billion general fund budget.
But even if SC shoppers go on a spending spree this month, it does not guarantee South Carolina will see a windfall in sales tax collections. One big reason: online shopping.
Most online stores do not collect state sales taxes. And SC lawmakers can't make them collect the taxes -- not unless the store has a physical presence in the state.
So far this year, South Carolina has collected $808.5 million in state sales taxes, or $3 million more than state officials predicted. That is less than 1 percent above the state's estimate, which is why the state's chief economist says December and January will be crucial months for sales tax collections.
The sales tax estimate is important because state lawmakers use it to decide how much money to spend in next year's budget. If the estimate comes up short, lawmakers could have to cut the budget.
"Even if the nation has good holiday sales, will it be local sales or Internet sales We will be watching that," SC chief economist Frank Rainwater told the Board of Economic Advisors on Monday.
State officials do not track how much sales tax money the state loses to online sales every year. However, two researchers at the University of Tennessee estimate the state lost $569.3 million in sales taxes to online sales between 2007 and 2012.
Some SC shoppers voluntarily pay sales taxes on online purchases. The online retail giant Amazon.com sends SC shoppers a yearly roundup of their purchases so they can pay the sales taxes on their tax returns -- part of a 2011 compromise with lawmakers that convinced the retailer to open a distribution center in Lexington County.
State officials estimate South Carolina collects $128.1 million in sales taxes every year from online retailers and shoppers who pay taxes on their online purchases. Still, Rainwater estimates South Carolina loses about $70.5 million a year in tax collections from online sales that it should be collecting.
State Rep. Kenny Bingham, R-Lexington, a member of the House Ways and Means Committee, says the issue of lost sales tax income due to online sales has not yet caused the state budget problems.
"There is nothing to be panicked about. We are in line with our projections," he said. "We can't force the collection of certain entities out of state. If they don't have a presence in South Carolina, it is not something we have the ability to stop or control."
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