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Sales tax loophole costs state millions

The online sales tax loophole is costing Massachusetts $387 million in state tax revenue, $280 million in sales to local businesses, and nearly 2,000 jobs, according to a new economic study released on Tuesday by the Massachusetts Main Street Fairness Coalition.

The report, prepared by Cape Ann Economics, examined $6 billion in online purchases made by Massachusetts consumers in 2011. The study determined that the state lost $387 million in state tax revenue in 2011 and projected that figure would roughly double to $783 million in 2020.

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Currently, Massachusetts residents who buy products from online companies that don’t collect sales tax are supposed to pay it to the state Department of Revenue. Few do, however, and there is little enforcement.

The Massachusetts Main Street Fairness Coalition, comprising retailers, elected officials, and labor unions, has been pressuring state officials to impose the 6.25 percent tax on Amazon sales after the world’s largest online retailer bought a local technology firm and opened an office in Cambridge.

Merchants are supposed to collect the tax if they have a physical presence in a state.

Kim Driscoll, mayor of Salem and cochair of the coalition, said in a statement: “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.”

Jenn Abelson can be reached at Follow her on Twitter @jennabelson.
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