Cyber Monday 2011 was the largest online shopping day in history with $1.25 billion spent.
While that doesn’t sound so bad for our national economy, it has a huge, negative impact on businesses and municipalities in Oklahoma.
Businesses in Oklahoma are required to collect sales tax from their customers and remit to the state, with that revenue then distributed to municipalities. Unlike these local businesses, however, many outof-state online companies are exploiting a tax loophole and not charging sales taxes at the time of purchase.
This gives out-of-state competitors an unfair advantage over businesses that are the backbone of the local economy and employ your friends, family and neighbors. These Oklahoma businesses also sponsor our children’s Little League teams and are involved in civic and community organizations.
Oklahoma is the only state in which municipalities do not receive ad valorem taxes for general operations. Instead, that source of revenue is dedicated primarily to schools and counties. While none of us like to hear the word “taxes,” especially this time of year, it is important to remember that Oklahoma cities and towns are overly dependent on local sales taxes to fund basic services: police, fire, roads, parks, libraries and road maintenance.
Sales tax is a historically inconsistent source of revenue, and the rise of the Internet marketplace has put Oklahoma cities and towns in an especially troubling position due to this loophole. Tax-free online shopping places the burden of paying that tax on the customer, who is generally unaware that this “use” tax must be claimed and paid on their yearly tax return.
That tax is remitted so rarely by the consumer that some estimate Oklahoma municipalities are losing up to $225 million per year in tax revenue. Inconsistent sales tax revenue makes it difficult for municipalities to offer consistent services year-to-year.
Several bills currently pending in Congress — notably, the “Marketplace Equity Act” and the “Marketplace Fairness Act” — will solve these inequities, if passed. If you decide to stay out of the cold and shop online, we encourage you to do the right thing and claim these purchases when filing your Oklahoma taxes. Our cities, towns and local businesses thank you!
Let’s make this the last holiday season that local businesses are forced to operate under a different set of rules than their online competitors.
Carolyn Stager is executive director of the Oklahoma Municipal League.