Butler County’s sales tax revenues could get a big boost if the state legislature passes a remedy so a U.S. Supreme Court decision regarding online and catalog sales tax can be implemented in the state.
Sales taxes are the biggest contributor to Butler County’s operating budget — collections totaled around $43 million last year — and those revenues could jump substantially if the legislature approves revising state laws.
Butler County Commissioner Don Dixon said they won’t know how much more money might flow to the general fund until the new law is implemented, but it will be a boost.
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“It could be substantial, it sure levels the playing the field,” Dixon said. “It could have a big impact on the county.”
Last summer, the high court justices sided with South Dakota in its battle with online retailer Wayfair and others. The hitch was as the law stands now online vendors only have to collect sales taxes from consumers if the vendors have a physical presence in that state. Consumers are supposed to file their own sales tax returns for purchases they have made tax-free.
Statistics show that doesn’t happen very often.
Of the 5.5 million income tax returns filed in Ohio last year, only 57,000 taxpayers reported owing use tax on internet or catalog purchases made from out-of-state retailers who didn’t charge sales tax. Those taxpayers paid a total of $4.3 million. Gary Gudmundson, spokesman for the Ohio Department of Taxation, said the state collected about $10.3 billion in sales tax in 2018, and the most recent figures from his department estimate about $250 million is associated with online and catalog purchases.
The Ohio House inserted a proposal in the biennial budget bill that requires out-of-state vendors who sell more than $100,000 and/or 200 orders in a year charge and collect Ohio sales tax, according to Gudmundson. He said at this juncture it looks like the Senate might concur.
Jon Honeck, senior policy analyst, for the County Commissioners Association of Ohio, said if the fix stays in it is a “big deal” for all 88 counties.
“Each year, county governments lose millions of dollars of revenue because out-of-state vendors refuse to collect sales tax due on internet transactions with Ohio consumers. Counties could use these funds for criminal justice and public safety programs,” Honeck said. “Twenty-nine states have already enacted laws dealing with this issue. Ohio’s proposed law is a huge step forward in closing this loophole in sales tax collection.”
The state and counties already lost a huge chunk of sales tax revenue after the federal government erased the Medicaid managed care sales tax. Butler County lost $3 million in annual revenue.
At this juncture — since it isn’t the law yet — Gudmundson said his department hasn’t started crunching the numbers. State legislative services estimated the state could reap $15 million in additional revenue in fiscal year 2020, and $20 million the year after. The counties and transit authorities could see $3.7 million next year and almost $5 million in fiscal year 2021.
Butler County Administrator Judi Boyko said she asked the finance department here to try to come up with an estimate so she has an idea of the potential 2020 budget impact. The actual figure won’t make it into the budget until the state budget passes and commissioners have a reliable revenue estimate from the state.
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“Then I imagine the board of commissioners would apply collections to its fiscal priorities,” she told the Journal-News. “Namely, reduction of debt, investment in productive economic development, preservation of services which enhance the quality of life for all county citizens.”
State Sen. Bill Coley, R-Liberty Twp., said his caucus hasn’t begun debating the tax issue yet but the Senate, generally speaking, doesn’t like to raise taxes. He said this is definitely an issue with two sides and he hasn’t made up his mind yet whether he’ll favor its passage.
“Is it fair that companies that operate retail establishments in the state, invest in the state, have employees in the state, have products that are at a competitive disadvantage because they’re customers have to pay sales tax. Whereas companies that just sell over the internet do not,” he said.
“It’s the balancing of keeping people’s costs to a minimum while making sure you have a level playing field.”
If the Senate passes the budget bill with the sales tax provision and the governor signs it, the law will take effect July 1.
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