Will Wisconsin soon be collecting sales taxes from more online retailers? Recent action by the Supreme Court may help answer that question. The court rejected appeals from online retailers disputing a 2008 New York court decision requiring retailers to collect sales tax on all online purchases. Current law requires online retailers to collect sales tax only if the company has a physical presence in the state. Traditionally, a retailer is understood to have a “physical presence” in the state if it has a store or distribution center there. New York and other states, however, insist that in-state affiliates—anyone that refers clients to the retailer’s website—constitute a physical presence.
Amazon.com LLC and Overstock.com, who both use affiliate programs, have been fighting the New York decision, which makes their products more expensive. Because the ruling provides a new source of revenue for state governments, many fear that the Supreme Court’s refusal to get involved in the matter may encourage other states to take similar actions in order to balance their budgets. Currently Amazon collects sales tax in 16 states.
Wisconsin does not require that retailers charge sales tax for online purchases unless the company has a physical presence—not including affiliates—in the state. Until recently, that included purchases from Amazon.com. However, Amazon began collecting sales tax in Wisconsin on November 1st after unveiling plans to open a distribution center in Kenosha. The move is expected to generate about $30 million in state sales taxes.
With Amazon now collecting Wisconsin sales taxes, 62 of the top 100 e-tailers collect and remit taxes on online purchases. Moreover, only about 25% of online sales remain untaxed in Wisconsin.
If recurring federal government shutdowns and debt crises teach us anything, it is that the words of career politicians, regardless of party, need to be examined with care: they need to be parsed. Debates among Badger State partisans over Wisconsin job trends and economic health, not to mention state budget and tax policy, have certainly required close examination.
The Partisan clash over Wisconsin employment figures is a case in point. The laser-like focus on job creation over the past three years arose, of course, because Gov. Scott Walker (R) promised to create 250,000 new jobs during his term. Had serious staff work been done on the idea during the 2010 campaign, it is unlikely that it would have been floated. In reviewing the past two decades, WISTAX researchers could find only one four-year period in which the state created that many jobs.
Regardless, the governor, fellow Republicans, and Democratic opponents all have been scouring employment data for figures that confirm the particular partisan story they want to tell. The rhetoric has been self-assured on all sides — and often misleading.
The origin of the confusion is multiple sources of employment data. Preliminary job statistics are released monthly based on a small survey sample and revised annually when data from an all-employer census are generated by the unemployment insurance system. The lag between survey and census reports is about six months.
The difference between the two can be striking. To understand why, read this WISTAX report by Todd Berry, at http://wistax.org/facts/economy. It was done for the Central Wisconsin Economic Research Bureau at the University of Wisconsin Stevens Point and delivered there November 8.
The state property tax cut recently passed in the state senate and assembly will have disparate effects on taxpayers. Governor Scott Walker’s proposed property tax cut of $100 million over two years will add $40 million to the school aid formula this year, resulting in up to $40 million in reduced school levies statewide. He is expected to sign it into law Oct. 20. In general, the cut will be fairly uniform across the state, about 10 cents on the school property tax rate. However, residents of districts with very high per student property values will see little, if any, relief.
This is a reduction from what property taxes would have been given the aid appropriation in the state budget. Under the budget bill, over half of all school districts would have received less aid this year than last. In those cases, property taxes were likely to rise there. In some of these districts, the added tax relief could result in school taxes still rising, but by a lesser amount. In others, particularly those receiving more aid, it could mean falling school property taxes.
For residents of 55 K-12 districts, the tax plan will result in no or just minimal savings. Property taxes in 21 K-8 districts and four UHS (union high school) districts will also change little. In another 30, tax relief will reduce the tax rate seven cents or less, compared to the statewide average of about nine cents.
What does the tax cut mean to you? Our estimates are here.