New Study Finds Online Sales Tax Loophole Costs Commonwealth almost 2,000 Jobs, $280 million in Lost Sales to Local Businesses, and $387 million in Revenue
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Massachusetts Specific Report Details the Economic Costs

 

Boston, MA, November 13, 2012 – The Massachusetts Main Street Fairness Coalition today released a new economic study that details the adverse impact that the online sales tax loophole is having on local businesses and state revenues in the Commonwealth.

 

The report is specific to Massachusetts, and examined $6 billion dollars in online purchases made by MA consumers in 2011, and concluded the loophole cost 1,970 new jobs, $280 million in sales to local businesses, and $387 million in state tax revenue.

 

The economic study, prepared by the Cape Ann Economics and authored by Edward Moscovitch and Cameron Huff, states:

 

“If Internet and other remote sellers had been required to collect the tax in 2011—eliminating their tax-based price advantage—we estimate sales by Massachusetts bricks and mortar stores would have increased almost $280 million.  The added sales could have supported 1,970 new jobs through the combined impact of direct hiring in the retail sector and the ripple effect of the new spending across the state economy.  By 2020, the additional sales would total $587 million, with 4,154 new jobs.  These economic impacts in turn would generate $8 million of new income and property tax revenues in 2011, rising to $18 million in 2020.

 

With respect to losses in revenue to the Commonwealth, the report determined that the figure in 2011 was $387 million and will be double that figure -- $783 million – in 2020.

 

Kim Driscoll, Mayor of Salem, and co-chair of Massachusetts Main Street Fairness Coalition stated, “This report paints a clear picture of the adverse impact this loophole continues to have on our state’s economy and underscores the need for action to level the playing field for our businesses.”   

 

"This is a valuable study that shows the consequences, in terms of lost jobs and revenues, of a policy that is unfair and badly out of date,” said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation.  “As online sales continue to grow, the costs to the Commonwealth will only get greater and greater over time.”

 

The report includes a discussion of macro trends and the complexion of ecommerce nationally, but the focus of the report is on providing a detailed analysis of the $6 billion in online purchases made by consumers in Massachusetts in 2011.

 

The study includes actual expenditure data, and is based upon an eight-step calculation that considers market behaviors that are specific to Massachusetts, such as the ease with which consumers could satisfy their preference for tax-free shopping in nearby New Hampshire, or might maintain a preference for internet commerce in the face of sales tax by simply shifting to preferable vendors who may already collect a tax.

 

Additional information about the need for sale tax fairness for Main Street businesses and the MMSFC can be found on our website at www.massmainstreet.com

 

The full report is available here.

 

 

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Contact:          Will Keyser

                        Mass Main Street Fairness Coalition

                        617.529.5849

                        will@keyserpublicstrategies.com

 

                        Cam Huff

                        Cape Ann Economics

                        508-423-8504

                        chuff@alum.mit.edu

 

                       

 

 


 

                       

 

 

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