As consumers continue to use the Internet to acquire goods, members of Congress are attempting to solve a quirk in tax law that is preventing states from collecting potential sales tax revenue. Bills in both the House and Senate aim to give states the authority to require out-of-state businesses selling online or through catalogs to collect taxes already owed under state law the same way local businesses do. Similar legislation failed to reach President Obama’s desk last Congress, but proponents are moving swiftly to ensure the bills remain at the top of the Congressional agenda.

Forty-five states levy a general statewide sales tax, with rates ranging from 2.9 to 7.5 cents $1 as of Jan. 1, 2015. Over the past decade, sales tax rates have remained relatively stable, with few states making significant changes. Among the states that levy a sales tax, the average rate was 5.64 percent in 2015, up from 5.35 percent in 2005.

In a 5-4 decision in Comptroller v. Wynne the Supreme Court held that Maryland’s failure to offer residents a full credit against income taxes paid to other states is unconstitutional. The State and Local Legal Center (SLLC)/International Municipal Lawyers Association (IMLA) filed an amicus brief in support of Maryland. 

Maryland taxes residents’ income earned in- and out-of-state. If Maryland residents pay income tax to another state for income earned there, Maryland allows them a credit against Maryland’s “state” tax but not its “county” tax. Maryland also taxes nonresident income earned in the state. Nonresidents pay Maryland “state” tax and a “special nonresident tax” equivalent to Maryland’s lowest “county” tax.

By Katherine Barrett and Richard Greene, CSG Senior Fellows

At least a dozen states—including Arizona, Florida, New York, Ohio and Wisconsin—have plans to cut taxes in the coming year. But statistics suggest that lowering the tax burden doesn’t always translate into economic activity.

There is no way to know for sure why Justice Kennedy wrote a concurring opinion in Direct Marketing Association v. Brohl stating that the “legal system should find an appropriate case for this Court to reexamine Quill.”  But even if you don’t read the State and Local Legal Center (SLLC) amicus brief’s criticism of ...

States face a conundrum as they struggle to regulate and tax e-cigarettes and other vapor systems that deliver nicotine to their users. Definitions in current tobacco and smoking laws can be amended to apply; however the evidence-base to establish equivalency to tobacco has not yet been established. Only three states have totally prohibited the use of e-cigarettes in public places, but 41 states prohibit the purchase of e-cigarettes to minors. Just two states have established taxes on these new products.

Inflation-adjusted gross domestic product grew 1.9 percent in the United States during 2013, which is somewhat lower than long-term expectations for economic growth. Employment rose a relatively healthy 1.6 percent, but nearly 1.2 million fewer people have a job than before the recession. Most analysts expect better GDP growth during 2014 and anticipate employment will finally rise above the pre-recession peak sometime during the second half of 2014. Economic growth will improve because the short-term drag caused by sequestration and the debt ceiling debate has played through the economy, improvements in household balance sheets are allowing solid consumer spending increases, business investment is rising with better business equipment purchases and housing construction is healthier in many regions.

Two cities in California—San Francisco and Berkeley—will be presenting voters with soda-tax initiatives in the upcoming November election. Soda and sugar-sweetened drinks such as sports drinks and energy drinks would be taxed, although infant formula, nutritional drinks, and diet drinks would not be taxed. Michael F. Jacobson, the executive director of the Center for Science in the Public Interest, said in an article in the New York Times that the soda industry has spent over $117 million since 2009 to combat soda taxes in the United States and is now paying attention to San Francisco and Berkeley.

The New York Court of Appeals in June 2014 overturned New York City's highly publicized soda ban that limited purchases of fountain drinks to 16-ounce cups in an attempt to reduce constituents' consumption of soda.  Most states have levied taxes on soda purchase intending to influence consumer choices, promote public health and generate revenue. 

CSG Midwest logo
Low-income workers in Ohio will get additional tax relief as the result of changes made in June to the state’s biennial budget. Following last year’s creation of an earned income tax credit, the legislature chose to expand it — from 5 percent of the federal credit to 10 percent.

Pages