State legislators seem to be always looking out for the kids. That is, until they stop looking out for the kids

In a yet another misguided attempt to grab tax revenues, there’s a Connecticut bill (SB 806) designed to increase collection of sales taxes when Connecticut residents purchase from out-of-state retailers.  The law re-defines what it means to be a “retailer” in the state, and creates a presumption of nexus when an out-of-state company advertises through Connecticut websites.

Unfortunately, it has momentum and, worse, it comes loaded with unintended consequences.  Let’s look at one.

For years, kids around the country have been collecting box-tops from cereal and snack boxes as an easy way to raise money for school trips and new school equipment. Box Tops for Education has raised over a hundred million dollars -- by collecting just a few cents on every box top.

Now, this fundraising function has gone online, with the Box Tops Marketplace, to generate commissions when parents shop at their favorite e-commerce websites. Here’s the Box Tops Marketplaces webpage:

The Box Tops Marketplace has grown to over a hundred participating websites, offering parenting essentials such as pet supplies, shoes, books, clothing, and household goods.

Online stores that participate in the Box Top Marketplace stores give a percentage of sales to support good causes, including several based here in Connecticut.

Thing is, few of the online stores participating in Box Tops Marketplace have any physical presence in Connecticut, and are therefore not required to collect, file, and remit the state’s sales tax on purchases made by Connecticut residents. Would the out-of-state retailers in Box Tops Marketplace continue to work with Connecticut schoos and PTAs if the state enacts SB 806? Or would they follow the example of nearly 200 retailers who simply stopped their online advertising in New York after that state enacted a similar law?

Keep in mind that online and catalog retailers can avoid the unreasonable burden of collecting and remitting remote state sales taxes by cutting-off their ad spending with Connecticut websites. And Connecticut consumers could still buy from these out-of-state retailers who stop advertising on statebased websites. That means SB 806 could have the unintended consequence of reducing ad revenue for Connecticut-based groups like the schools in this example – without increasing sales tax collections.

Comments

[market entry research]

Bad news for retailers... thanks for sharing this info.