Flawed Mississippi “Lost Revenue” Study

The latest ridiculous study about how much revenue is “lost” through unpaid use taxes just came out.

The full report is here:

http://www.mississippi.edu/urc/downloads/tax_revenue_remote_sales_2017.pdf

While I’m sympathetic that hard numbers for many things are hard to come by, the assumptions used are so overstated that the report is certainly not even close.  Not only that, Amazon is now collecting sales tax for Mississippi shipments, so the real uncollected use tax on remote sales would be a small fraction of the alleged range of $105 – $122 million per year.

From the report, discussing the limitations:

“In order to determine the value of potential sales and use tax collections, the value of remote sales made to residents of the state of Mississippi is needed.  Unfortunately, this data does not exist.   While national e‐commerce data are available, it is not divided among the states.  Moreover, data regarding non‐electronic remote sales do not exist.  Non‐electronic remote purchases consist of sales through more conventional means such as telephone and mail order.  As a result of this lack of data, the very foundation of the estimation in this brief is based inherently on many assumptions and estimates

Yes, lots of guesses.  I don’t assume or claim bad faith necessarily, but I absolutely question their assumptions.

Why I believe it’s overstated?

  • They don’t grasp that many larger retail chains are dominating e-commerce and already do collect tax for online orders
  • Mississippi has the lowest median income in the entire country, 50th out of 50.
  • Assumption (they downgraded the official MS guess) that MS is 0.85% of all national retail.  They are only 0.95% of the population and have the lowest median income in the country.  I believe 0.85% is FAR too high.
  • Lowest rate of ALL states for having a credit card.  Only 51.6% of 19+ year old adults have one (in their report)
  • 2nd lowest percentage of all states of 15+ year olds who shop online (in their report)
  • 65% of MS residents have broadband internet, 18% live in a household with no Internet access – far lower than the national averages (in their report)
  • Amazon is now collecting tax for Mississippi shipments (not the authors’ fault per se)
  • Huge guesses as to how much of any interstate commerce is taxable or not. I assume much of it is for retailers for resale and non-taxable.

In short, this report will get tweeted but it’s just a series of wildly inaccurate and overstated assumptions that are not likely to be found in the real world.

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