Cyber Monday is increasingly popular with shoppers, but the organization representing brick-and-mortar retailers in Illinois says changes still are needed to level the playing field.
The Illinois Retail Merchants Association said there needs to be a requirement for all online retailers to collect the same state sales taxes that other merchants must add to their customers’ bills.
“There shouldn’t be a question of tax based on where you buy something,” said IRMA President David Vite. “The tax is supposed to be paid. If someone orders something from an online retailer or a catalog retailer that doesn’t collect the tax, the customer owes the money to the state.”
Therein lies the problem. If an online retailer doesn’t collect the sales tax when an item is purchased, it is left up to the buyer to pay the amount when filing his or her state income taxes. Although the state Department of Revenue says collections from buyers have increased, a lot of money from online sales still isn’t being collected.
A department study completed in 2011 estimated the amount of unpaid sales tax due the state from both businesses and individuals would hit $170 million in the budget year that ended June 30. That figure is estimated to be $197 million this fiscal year.
In calendar year 2011, the state collected nearly $11.4 million in sales taxes from more than 272,000 Illinois taxpayers. That was the first year Illinois income tax forms included a line for people to report sales taxes they owed for online purchases. Before that, the state collected about $1 million a year, said Revenue spokeswoman Sue Hofer.
Businesses are also collecting and paying between $20 million and $30 million in sales taxes that weren’t being collected before.
“We’re collecting substantially more,” Hofer said.
Many businesses that have both online sales and brick-and-mortar stores, like Barnes and Noble, Target and others, have always collected sales taxes from both, Hofer said. Not everyone does, though.
“The big gorillas are still out there, Amazon and eBay,” Vite said.
Both Vite and the state support the Marketplace Fairness Act, sponsored by U.S. Sen. Dick Durbin, D-Ill., among others. It would provide for collection of state sales taxes on online purchases.
“It’s being discussed as we speak in the Congress,” Vite said. “We’re hopeful that during these negotiations that are going on, this will be part of them.”