Internet sales explode, a tax cow for the Michigan government during the coronavirus pandemic

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Michigan lawmakers made the move at an ideal time.

On December 12, before most Michigan residents had ever heard of the coronavirus, Governor Gretchen Whitmer enacted a group of bills making it easier to collect sales tax on more online transactions. .

Every time a Michigan resident clicks “Complete Order” to purchase most products from internet marketplaces like Amazon, Ebay, or Etsy, regardless of the seller’s location, the Michigan government applies a discount under in the form of a 6% sales tax. Even the small businesses that facilitate online sales, whether or not they sell the products, are often required to remit sales tax to the state.

The additional sales tax collected through the new legislation is elusive, but it has contributed to one of Michigan’s healthiest revenue streams, according to data released by the state’s Treasury Department at the end last month.

Unsurprisingly, data on consumer spending through the coronavirus pandemic reflects an increase in online shopping, a welcome surprise to state revenue forecasters who were too pessimistic with their May forecast.

Online sales tax revenue compared to the same period in 2019 increased by $ 140 million between April and July, despite a pandemic that laid off nearly a quarter of Michigan’s eligible workers in early May.

Online sales tax revenue is a beacon of hope amid still gloomy forecasts for a budget deficit of nearly $ 1 billion for fiscal 2020 and a combined $ 4.2 billion deficit of tax revenues in 2021 and 2022, according to data released at the August 24 consensus revenue estimation conference, where the state treasurer, budget director and legislative analysts agree on revenue projections that inform the state budget process.

Michael McWilliams, an economic forecasting specialist at the Quantitative Economics Research Seminar at the University of Michigan, said the growth in tax revenue from online sales was “not surprising.”

“People stay at home,” he said. “They can’t necessarily go to the stores they want to go in April and May, so people buy things online.

“It’s great that consumers are spending money, and that’s what the economy needs right now… This increase in consumer spending that we’ve been talking about is really the product of this extra money in the pockets. people. “

Michigan residents have received nearly $ 43 billion in federal stimulus funds since the start of the pandemic, through Paycheck Protection Program loans, additional unemployment benefits and lump sum stimulus checks. According to data presented by economic forecasters at the State Treasury Department and the University of Michigan, Michigan residents have been freer in their spending than the rest of the country.

By the end of July, Michigan’s consumer spending had grown nearly 4% since January, while the rest of the country was spending 8% less on average.

New data projects a decline of $ 500 million in forecasted sales tax revenue, down from $ 8.7 billion expected in January ahead of the pandemic to $ 8.2 billion expected on August 24. In May, forecasters predicted sales tax revenues would decline even more, by nearly $ 1.2 billion.

Online sales helped soften the shock.

“Obviously, with the pandemic, people are buying incredible amounts of stuff online,” said Eric Bussis, chief economist and director of the Office of Income and Tax Analysis, “and it just does increase our sales tax.

Online sales “really start to take off in May, June and July, but that’s also when unemployment benefits really started to be paid… as well as the stimulus payments that started to hit the market. bank accounts later in the pandemic. “

Sales tax revenue from online sales peaked in July, up $ 46 million from the previous year.

Prior to a June 2018 Supreme Court decision in South Dakota v. Wayfair, it was not so easy for states to collect sales tax online. Out-of-state online retailers claimed they had no obligation to pay state sales tax because they had no physical presence or employees located in the state. The Supreme Court rejected this argument, allowing Michigan and other states to collect higher tax revenues from online sales.

“In late 2019, the (Michigan) legislature also passed a bill that expanded the definition not only to sole proprietorships, but to market sellers,” Bussis said. “The old threshold was if, as a business, you made more than 100 transactions online in Michigan, then you had to start paying sales tax. What has not been trapped are the market enablers, online websites that will bring together sellers across the country.

Michigan is now reaping the benefits of these tax law changes.

The pandemic and the business closures resulting from the Whitmer Executive Orders have resulted in all kinds of online transactions, from marijuana to cars, groceries and even real estate sold through virtual showings.

“We buy all kinds of stuff online,” Kirt Rivard said as he refueled in Saginaw last week. “We get housewares, toilet paper, paper towels, bulky items that are harder to get in the supermarket, clothes, work shirts, stuff like that.”

And sitting outside a store in Saginaw while licking brightly colored ice cream with his two daughters, Joel Dollhopf, 46, of Saginaw, said he too had spent “a little more” online during the pandemic and the quarantine period.

“I just bought a bunch of clothes from Kohl’s online and then a few items from Ebay,” he said. “When you think of all that money that people were getting, the extra $ 600 a week, then what are you going to do with it?” Spend it.

“And I think there’s a lot of depression right now and people are shopping more because they need something to make them happy.”

COVID-19 PREVENTION TIPS:

In addition to washing your hands regularly and not touching your face, authorities recommend practicing social distancing, assuming anyone can carry the virus.

Health officials say you should stay at least 6 feet from others and work from home, if possible.

Use disinfectant wipes or disinfectant spray cleaners on frequently touched surfaces in your home (doorknobs, faucets, counters) and take hand sanitizer with you when you go places like stores.

Michigan Governor Gretchen Whitmer has also issued executive orders requiring people to wear face coverings over their mouths and noses in crowded indoor and outdoor public spaces. See an explanation of what this means here.

Additional information is available at Michigan.gov/Coronavirus and CDC.gov/Coronavirus.

For more data on COVID-19 in Michigan, visit https://www.mlive.com/coronavirus/data/.

Learn more about MLive:

A salary of $ 300 a week won’t last long

September 3 coronavirus data

Michigan businesses on the brink of disaster

Cinemas demand reopening

Alcohol sales are a bright spot amid coronavirus

Thrive in the midst of the pandemic

There is no place like home during a pandemic


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