Online shopping threatens local sales tax revenue

Jan 4, 2017

Shoppers now pay Colorado sales tax when they make online purchases.

Finally being able to capture revenue from Internet shopping is good news for the state. The money is still out of reach for cities and towns, though, which has some local officials casting a concerned eye towards the future.

Shopping online is easy and cheap. Frosty Marriott, who’s on the Board of Trustees in Carbondale, knows this. One reason it’s cheap is because buyers don’t pay local sales tax, although they recently had to start paying it on a state level.

In December, the Supreme Court refused to hear an appeal regarding the “Amazon-tax,” which forces online retailers to collect Colorado’s sales tax, which amounts to about 3 percent. It’s a significant amount of money; some estimate Colorado’s losses topped $170 million each year because of unrecovered sales tax revenue from online shopping.

According to Carbondale’s mayor, Dan Richardson, “municipalities are still not even in the mix.” Sales tax fills up the town’s general fund, along with oil and gas revenue, which is way down.  

It’s places like City Market, the Roaring Fork co-op and liquor stores that generate the most sales tax for the town. Nonetheless, online purchases are a revenue source, and one that’s frustratingly out of reach.

“I don’t know why we couldn’t piggy-back on the state sales tax,” said Marriott. He wants Amazon to collect local sales tax, too, which won’t happen unless towns like Carbondale join together and lobby at the state capitol.

Harmony Scott owns a jewelry business on Main Street in Carbondale. She benefits plenty from online sales and ships her product all over the country. Still, the majority of her sales come from her store. If, however, she had to calculate state and local taxes for everywhere she sends her jewelry, the amount of paperwork and time would be “horrible.”

This could become a reality if officials act on their concern, because if the state is entitled to sales tax, why wouldn’t towns and cities be, too?