New Buckeye Institute-NTUF Report Looks at the Impacts of E-Commerce Tax Policies

Jun 17, 2021

Columbus, OH – A new report, Taxing Beyond Borders: Principles for Ohio’s Tax Policy After South Dakota v. Wayfair, released by the Economic Research Center at The Buckeye Institute and the National Taxpayers Union Foundation, looks at the impact the U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair has had on tax policy in Ohio and how lawmakers can craft a simple, easy-to-use e-commerce tax policy that doesn’t harm the state’s economy.

“In its South Dakota v. Wayfair decision, the U.S. Supreme Court opened the door for states to revise how they collect sales taxes on out-of-state retailers. Unfortunately, Ohio simply adopted South Dakota’s model to comply with the court’s ruling,” said Rea S. Hederman Jr., executive director of the Economic Research Center and vice president of policy at The Buckeye Institute. “But South Dakota’s policy does not offer a one-size-fits-all approach and Ohio should revisit its e-commerce tax policy to ensure it does not unfairly hinder small businesses or stall economic growth.”

In the report, the authors use two guiding principles—do no harm and simplicity—to outline the approach lawmakers should take to craft Ohio’s e-commerce tax policy that avoids “overburdening businesses with complex tax regimes that hamper business investment, economic growth, and job creation.” The authors recommend that Ohio:

  • Raise the threshold required for an out-of-state retailer to collect sales tax from $100,000 to $500,000, thus exempt smaller companies from expensive administrative burdens that they cannot afford;
  • Simplify Ohio’s tax code to reduce compliance costs for companies that meet the post-Wayfair thresholds;
  • Reduce the number of taxing authorities, and make tax remittance straightforward; and
  • Avoid expanding Ohio’s economically destructive commercial activities tax.

“Small businesses and entrepreneurs have unfortunately suffered under Ohio’s low de minimis threshold requiring out-of-state firms to pay remote sales taxes,” said Andrew Moylan, National Taxpayers Union Foundation executive vice president. “Instead of adopting South Dakota’s low threshold for out-of-state tax collection and reporting, Ohio should raise these thresholds, simplify compliance requirements, and limit the nexus of its commercial activities tax. Increases in online shopping during the pandemic have illustrated the vital importance of ensuring tax policies are fair to small operations that need the internet to compete. Our analysis with The Buckeye Institute clearly demonstrates the need for Ohio to update its tax laws to make its system friendly for taxpayers and businesses everywhere.”

Taxing Beyond Boarders was authored by Rea S. Hederman Jr., executive director of the Economic Research Center and vice president of policy at The Buckeye Institute; Andrew J. Kidd, Ph.D., former economist with the Economic Research Center at The Buckeye Institute; James B. Woodward, Ph.D., former economic research analyst at the Economic Research Center at The Buckeye Institute; Andrew Moylan, executive vice president at the National Taxpayers Union Foundation; and Andrew Wilford, a policy analyst at the National Taxpayers Union Foundation.

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