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DMA Disputes "Lost Taxes" Numbers

timothy posted more than 11 years ago | from the all-in-the-counting dept.

Businesses 23

DaveAtFraud writes "The Direct Marketing association (DMA) has released a study (PDF only) showing that the amount of tax revenue supposedly 'lost' by the states due to on-line sales has been significantly overstated. Proponents of online taxes quote several University of Tennessee studies which found states missed out on $13.3 billion in 2001 collections. In contrast to UT's claim, the DMA's study says the figure was closer to $1.9 billion. And while UT finds states could be stiffed by $55 billion in 2011, the DMA claims it's more like $4.5 billion. You get the picture (I wonder where UT gets its funding? It wouldn't be the state of Tennessee by any chance would it?). The DMA study points out flawed growth assumptions and outright falsehoods (e.g., counting certain business-to-business transactions that actually did create tax revenue for the state in its count of missed taxes) in the UT studies that cast a shadow of doubt on the UT studies' validity."

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hmmm... (2, Funny)

Tumbleweed (3706) | more than 11 years ago | (#5520858)

...looks like somebunny's been going to the RIAA School of Accounting and Business Ethics.

Bias (3, Informative)

_Splat (22170) | more than 11 years ago | (#5520898)

For all the claims of UT being biased, realize that the DMA has a significant interest in there NOT being taxes on out-of-state sales.

Re:Bias (2, Insightful)

sweetooth (21075) | more than 11 years ago | (#5520918)

True, but the number is possibly somewhere in the middle which seems much more reasonable.

They're both wrong. (4, Insightful)

rudy_wayne (414635) | more than 11 years ago | (#5520978)

The amount of tax revenue lost by the states is exactly zero.

1. You can't lose something you never had.
2. There is no legitimate reason to collect these taxes.

The clamor for these taxes is merely another attempt by greedy politicians to shove their hands deeper into the pockets of consumers. With the economy the way it is, and many states facing multi-billion dollar budget deficits, the states will tell whatever lies are necessry to raise new revenues.

Re:They're both wrong. (2, Informative)

a hollow voice (112803) | more than 11 years ago | (#5521309)

> The amount of tax revenue lost by the states is exactly zero.

> 1. You can't lose something you never had.

Sorry, but that's entirely wrong.

Opportunity Cost (definitions: 1 [investorwords.com] , 2 [msn.com] ) is essentially the issue here. The cost of something also includes the opportunity that is given up, even though it was never actually posessed. Assuming that consumers would buy the same goods whether online or in stores, every purchase online deprives the states of the otherwise-available opportunity to tax that purchase.

This situation is a little different from classic examples of opportunity cost, because the person making the choice is not the one losing the opportunity, but the same principles apply. The states never had that money, but they have indeed lost it because the online purchases removed the opportunity.

I'm no economist myself, so if there's a principle that applies more directly to the situation I'd be interested to hear it. Also, I make no judgement on taxing online purchases here; I'm just pointing out that you don't have to be able to hold something in your hand in order to lose it.

Re:They're both wrong. (3, Insightful)

unitron (5733) | more than 11 years ago | (#5521380)

". Assuming that consumers would buy the same goods whether online or in stores,..."

Yeah, right. I can go right down the street and get it right away for about the same total expenditure but I'd rather buy it online and wait a week or so for delivery. Uh-hu. Sure.

Re:They're both wrong. (1)

a hollow voice (112803) | more than 11 years ago | (#5521431)

Funny, I was halfway anticpating more of the opposite response - that online purchases shouldn't be compared to store purchases because the convenience of shopping from home and the lack of sales tax makes online sales more attractive to some people, particularly when buying large-ticket items (such as electronics) where sales tax is a bigger concern, so the online sales numbers would be inflated compared to what you could expect from traditional sales.

I think both are valid arguments depending on individual preference, and either way, states are still losing money on online purchases - it's just a matter of how much.

Re:They're both wrong. (1)

unitron (5733) | more than 11 years ago | (#5522105)

Sales tax and having to drive to and from the store usually adds up to about the same as the extra you pay for shipping when buying online so often the deciding factors are whether the online price is lower enough to induce you to wait several days for delivery, whether being able to inspect the merchandise in person before purchase matters, and, the one that seems to happen most often, whether the item is available online but not locally or available locally but not online.

Re:They're both wrong. (1)

a hollow voice (112803) | more than 11 years ago | (#5521529)

"Assuming that consumers would buy the same goods whether online or in stores..."

Come to think of it, I can see how that statement could be misread. Put another way, this is assuming that a given consumer will buy certain products they want/need no matter what, and the variable is how much is bought online versus how much is bought in local stores. This as opposed to the idea that people on average are spending more money overall because of online sales.

Sorry if that wasn't clear.

Re:They're both wrong. (1)

icebike (68054) | more than 11 years ago | (#5522385)

Except you forgot to read the constitution.

The goods an services of one state may not be
taxed by another state.

Even if such tax bills were passed they would
be overturned.

Re:They're both wrong. (1)

a hollow voice (112803) | more than 11 years ago | (#5522422)

>Except you forgot to read the constitution.

>The goods an services of one state may not be taxed by another state.

>Even if such tax bills were passed they would be overturned.

As I said before, "I make no judgement on taxing online purchases here." The fact that tax money is being lost does not imply any belief that states have a legal right to regain that money.

Please read posts in their entirety before replying.

Re:They're both wrong. (1)

Grishnakh (216268) | more than 11 years ago | (#5539507)

Constitution? When was the last time that got in the way of lawmakers?

Re:They're both wrong. (1)

operagost (62405) | more than 11 years ago | (#5539662)

Opportunity cost would be a valid concept if

1. No one lived in a rural area. Out in the sticks, you might have to drive an hour to even get to a retailer who has the item you want, if it's high-tech or some other specialty.
2. I could count sales lost to my competitor on my taxes as a business loss. Every sale that could have been mine but went to a competitor must be a loss as well!

Re:They're both wrong. (1)

a hollow voice (112803) | more than 11 years ago | (#5540022)

Opportunity cost would be a valid concept if

1. No one lived in a rural area. Out in the sticks, you might have to drive an hour to even get to a retailer who has the item you want, if it's high-tech or some other specialty.

First off, that is not an argument against the validity of the concept of opportunity cost. Opportunity cost is a very simple idea - if you go to college instead of taking a job, the cost of college isn't just tuition etc. but also the money you didn't make by taking that job for the duration of your college education. That's the opportunity cost of college, and every time you have to make a choice, that choice has an opportunity cost.

I will proceed with the assumption that you're actually questioning whether opportunity cost is meaningful in this situation where the loss is incurred by a third party, since that's more interesting.

Yes, all other things being equal (a fairly big jump, socioeconomically), people in rural areas would be more likely to order things online. Following that logic, people in cities would, by the same token, be more likely to buy locally compared to their rural counterparts. Since we're dealing with state taxes, not local taxes, these factors would average out state-wide according to the overall population density of that state to give a certain percentage of shopping done online. Therefore this is a matter of degree, and does not affect the fact that money is being moved out of the taxable commerce within the state.

2. I could count sales lost to my competitor on my taxes as a business loss. Every sale that could have been mine but went to a competitor must be a loss as well!

No. Not remotely the same thing.

First, I'm not sure where you got the idea that businesses can write off losses of just any kind to be magically reimbursed by the federal cash cow, but it just isn't reality.

Second, it seems that everyone who has replied to me in this thread is assuming that, when I say money is lost, that somehow implies a legal or moral right to regain that money. That was never said or implied, and I even specifically stated in the beginning that I was not endorsing the idea of letting states somehow regain that money. Please STOP reading things into posts that are not there. Loss is not the same thing as theft - that's why they're two different words. Even if it only costs $1, if I make the choice to buy something online instead of locally when both options are available, the state has lost the tax on that sale, regardless of whether or not they have a right to regain that money.

Re:They're both wrong. Aye. (2, Funny)

renehollan (138013) | more than 11 years ago | (#5521437)

Having returned to relatively socialist Canada from the (surprisingly still quite free market, despite the corporatism (i.e. business buying law) going on) U.S.A., I can only say...

<warning: rant>

Those who support taxation deserve to have their heads cleaved from thier bodies, in the most painful way possible, and their corpses recycled to nourish the plants that are harvested to produce the grains that feed the pigs who's processed flesh in the form of ham or bacon I'm occasionally given to consume.

The social stagnation and "nanny state" attitude here is so opressively overwhelming it boggles the mind: "We can't do that because it would take more tax dollars and cost us too much."

Fuck the socialist attitude: You'd like hot lunches at school for your kids (no shit: this is unheard of in a Canadian public school), get off your arses, get a deal struck between the school board and a local caterer, and have parents volounteer to distribute the food... best $1.25 a day I spent in the U.S.

But, nooooooo... we'd have to have 250 government bureaucrats overseeing the nutritional content of the food in such a program. And so, our kids eat cold sandwiches (except the lucky few, like my daughter, who's parents sacrifice to purchase a $30, sorry, $34.50 after tax, thermos for hot soup for her).

Socialized medicine? Can't save your kid's life for lack of the funds to purchase the experimental drugs because you've already spent them in the form of taxes that are supposed to pay for medical care.... "So sorry, your kid dies because after paying our administrators we certaintly can't afford any kind of experimental treatment."

Worse than the Nazis they are, those damn socialist parasites -- yes, yes, nothing can compare with the slaughter of six million innocent people in a grand short-lived murder spree, at least not in "horror per day" ratings. But, like thousands of paper cuts, socialist butchers take their human toll, slowly, over time, that, if left unchecked, would surely surpass the death toll of any genocide attempt. Like any proper parasite, they never destroy the entire productive host population, though.

</warning>

Bravo!, then, to those that oppose any moral basis for involuntary taxation (and the, "But look!, we gave you a road" (2000 miles away) argument doesn't wash -- it's rather like the guy who expects sex from his date because he bought her dinner: "rape" seams a fitting word in both cases).

And to those Americans who think Canada is a "kinder, gentler" society for all the social programs, I say, come and live here for a year, maybe get sick and need your tax-funded services. You'll find them surprisingly unavailable.

For myself, born here, I struggle against U.S. immigration hurdles (been there, got the LC, green card processing slowed by the INS, and had to return), but slowly resign to the life-sapping tax yoke. Yet, for my son, an American, born and raised, god-fucking-damit, I simultaneously yearn to keep him near, and hope for an American family to adopt him into the bosom of freedom that is his birthright.

damn straight (1)

SHEENmaster (581283) | more than 11 years ago | (#5539993)

I'd add to your rant, but your arguments kick enough ass to stand on their own.

There aren't enough people like you in the US; it's a miracle that thing aren't as fucked up here as over there or in red China.

Online sales are just another form of MAIL ORDER (1)

Old.UNIX.Nut (306040) | more than 11 years ago | (#5521183)

Sales made online and shipped to customers is just another flavor of mail order, and keeping these sales "tax free" will not last much longer.
The idea Internet as a tax free zone was accepted during the dot-com boom only because those businesses had the funding to "buy politicians off" on rules for taxation.
If online sales outlets don't get wise and jump on existing rules for mail order taxation the States will end up taxing them even more than conventional mail order sales are taxed today.

Never thought I'd see the day (2, Funny)

0x0d0a (568518) | more than 11 years ago | (#5521788)

The Internet under attack from the state governments, and the Direct Marketing Association riding to its rescue?

Yeesh.

Re:Never thought I'd see the day (1)

quintessent (197518) | more than 11 years ago | (#5523165)

Hell's frozen. I just checked.

Ok so how much tax do I pay on (1)

infonography (566403) | more than 11 years ago | (#5522380)

My Mail Order Bride from Russia?

No I will not sink to the level of 'In Soviet Union online taxes you'

Gasp, I just did it. Ouch.

More "internet" bullshit. (1)

Alsee (515537) | more than 11 years ago | (#5524353)

Ooooooo! It's the internet! It's different! We need new different laws! Ooooooo!

More bullshit. The internet is irrelevant. States do not get to tax inter-state commerce. Period. It doesn't matter if it is catalog sales, phone sales, or this new fancy shmancy magic inna-web-thingy.

The fact that it involves the internet is irrelevant. What we need is a law that says laws cannot contain the word internet.

-

Computers & the Internet (0)

Anonymous Coward | more than 11 years ago | (#5533670)


I hear they have the Internet on COMPUTERS now!

Don't Believe DMA (0)

Anonymous Coward | more than 11 years ago | (#5541505)

The DMA outright lies when it comes to statistics. Ask the group for the raw numbers that go into its reports--they won't give them to you.

Remember, the DMA is the same organization that claims that cold-calling telemarketing results in $290 Billion in sales every year. Do the math: that means that every man, woman, and child spent over $1000 in telemarketing goods! No fucking way!
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