As the subject of taxation on Internet commerce becomes increasingly controversial, one tax expert at Brigham Young University is being called on to search for solutions to the issue cited as one of the major causes for state budget losses across the United States.
“The result of lower sales tax collection is seen in the form of up to 15 percent losses in tax revenues in some states,” says Gary C. Cornia, a professor of public management at BYU’s Marriott School of Management and former commissioner of the Utah State Tax Commission. “It is a matter of great concern.”
According to a recent study commissioned by the Institute for State Studies, a non-profit group based in Salt Lake City, state revenues faced a loss of over $10 billion in uncollected sales taxes on online transactions in 2001. The study indicated that number could balloon to more than $45 billion by 2006.
The Reilly Center for Media and Public Affairs at Louisiana State University recently invited experts from around the nation to address a number of public policy issues facing its home state. Cornia, current president of the National Tax Association, received a fellowship from the Reilly Center to discuss state and local tax policy in the national electronic commerce environment.
“The purpose of the visit was to introduce new ideas and elevate discourse on important fiscal issues impacting Louisiana,” said Adrienne Moore, director of the Reilly Center. “The result is expert information that may help frame public policy on matters that are significant to our state.”
Cornia presented lectures dealing with taxation issues to Louisiana state legislators, LSU students and faculty. Jim Richardson, director of the Public Administration Institute at LSU, said Cornia made them “more aware of the problems and options with respect to resolving the ability of state and local governments to tax electronic commerce.”
In an address to Louisiana State Senate Revenue and Fiscal Affairs Committee, Cornia, who co-chaired a major study for the National Tax Association dealing with electronic commerce, cited a study indicating that Louisiana governments could experience up to a 7 percent loss in its sales tax revenues due to electronic transactions over the next seven to 10 years. He stated that the lack of required Internet sales tax collection will force states to make difficult tax-reform decisions in the future.
“All 45 states with sales tax have “use tax” laws in place, which allow for the collection of tax on purchases where sales tax is not collected, such as with Internet purchases,” says Cornia. “The problem is with the enforcement of these laws. I believe states will continue to experience increasingly large revenue losses until this issue is resolved.”
The Marriott School is located at Brigham Young University, the largest privately owned, church-sponsored university in the United States. The school has nationally ranked programs in accounting, business management, information systems, organizational behavior, public administration and entrepreneurship. The mission of the Marriott School is to educate men and women of faith, character and professional ability who will become outstanding managers and leaders throughout the world. Approximately 3,000 students are enrolled in the Marriott School’s graduate and undergraduate programs.
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Writer: Michael Johanson
