President's Perspective
Counties taking a hit online

As we move into the budget season, revenues are uppermost on the minds of county commissioners around the state. Of particular interest are sales tax figures for the final two months of the year.

President's Perspective By Breeden Blackwell President's Perspective Archive

November and December are always two of the biggest months for shopping, and retailers across the state and nation reported positive sales, a sign that our economy continues to rebound.

Normally this would be good news for cash-strapped local governments in the form of additional sales tax revenues, but that news needs to be tempered. A greater number of consumers are using the World Wide Web for purchases, and that often means less sales tax revenues for state and local governments because many of the companies that sell goods via the Internet and mail orders are not required to collect local and state sales taxes.

Collection of remote sales taxes is one of the National Association of Counties’ top federal priorities. A study conducted by the University of Tennessee estimated that state and local governments will lose more than $45 billion in revenue from these untaxed purchases by 2006.

The U.S. Supreme Court has ruled that only Congress can compel remote vendors to collect sales taxes on behalf of state and local governments. Bills to require businesses to collect these taxes once a certain number of states streamlined their sales tax laws were introduced during the 2003-04 session of the U.S. House of Representatives and Senate. Enough states, including North Carolina, changed their laws to conform to the Streamlined Sales Tax Agreement (SSTA), but these bills were not acted upon before the 108th Congress adjourned. The 109th Congress convened in January, so the ball is once again squarely in Congress’ court.

North Carolina was one of the first states to modify its sales taxes to conform to the SSTA requirements, thanks in large part to the efforts of our advocacy staff and county commissioners who educated our state representatives on this issue. Now it’s time to turn our attention to our federal delegation.

This is a big issue for local and state governments, and it’s not going away. The revenue losses from untaxed Internet sales for North Carolina’s state and local governments were more than $680 million in 2002-03. The losses are projected to top $1 billion by 2006.

Online shopping in particular continues to become more and more attractive to consumers, mainly for the convenience and not as a way to get out of paying sales taxes. Shopping via the Internet allows consumers to avoid long lines at the mall and traffic jams on the highways.

As North Carolina officials gather in Washington, D.C., March 4-8 for NACo’s annual Legislative Conference, I ask each of you to get in touch with your representatives and urge them to support this issue.

Several members of North Carolina’s delegation had signed on as co-sponsors of the earlier bills, including Rep. David Price and Rep. Brad Miller. We need to make sure they continue to support this effort in the 109th Congress, and we need to bring the rest of the Tar Heel delegation online.