WASHINGTON, June 21 U.S. cities and counties
lost out on $1.7 billion of new revenue this year because
Congress has not passed a bill allowing states to tax Internet
sales, a report released by the U.S. Conference of Mayors on
From 2011 through 2013, the additional revenue would have
totaled $4.5 billion, according to economic research group IHS
Global Insight, which was commissioned to produce the report.
Under a 1992 U.S. Supreme Court ruling, states can only tax
Internet sales made by companies with a physical presence within
their borders. That means online retailers charge sales tax in
some states and not in others.
The U.S. Senate in spring passed legislation that would
allow states to tax sales made beyond their borders. It faces an
uncertain future in the House of Representatives, where
Republicans have raised concerns that the tax could burden small
The bill would exempt sellers with less than $1 million in
nationwide sales from collecting sales taxes.
The Republican sponsor of the bill in the House, Steve
Womack of Arkansas, told reporters earlier this week Congress
has recently focused on other, larger pieces of legislation and
he was not optimistic the bill would pass soon.
States, which collect most sales taxes, have said their
budgets are hurting. Fitch Ratings estimated that states are
losing $11 billion annually without the online tax.
Some local governments add their own taxes, ranging from 0.1
to 6 percent, IHS said.
State and local governments combined lost out on almost $14
billion this year by not being able to tax online sales, IHS
In 2012 New York City had the greatest loss, of $200
million. Phoenix and Chicago followed with $18 million each.
Mesa, Arizona, with an annual budget of $325 million, has
lost out on $14 million over the last three years, the study
The number may not be large, Mesa Mayor Scott Smith said,
but Internet commerce will continue to grow and Congress must
pass the legislation to "stop the bleeding." Mesa does not
charge property taxes.
The bill would boost the city's revenue in two ways, because
it relies heavily on state funds as well as sales taxes, said
"We're really bare bones and we're operating on the fringes
in terms of additional revenue or additional cuts," he said,
adding that any new revenue would go toward the police, parks,
libraries and other services.