◼ POLITICS Bloomberg Businessweek March 8, 2021
39● Can the U.S. make climate change a
standalone diplomatic issue with China?Seeking a
Climate
Carve-Out
In the lead-up to the 2015 Paris climate agreement,
then-President Obama flew to Beijing and won a
major concession from President Xi Jinping—that
China would peak its carbon emissions around- It paved the way for the historic accord.
As President Biden seeks to aim higher before
a global climate conference in the U.K. this
Revenue From Online Sales Taxes Soars in Texas$150m100500
11/2019 1/20215%432
11/2019 1/2021E-commerce tax revenue as share
of sales tax revenueE-commerce tax revenue
◼ Online-only stores
◼ Marketplace aggregatorsTHE BOTTOM LINE More online shopping, plus a court decision
that lets states tax those purchases, means smaller than expected
budget shortfalls for stressed state governments.unknowingly helping to keep their state finances
afloat—thanks to a 2018 Supreme Court decision in
South Dakota v. Wayfair.
South Dakota passed a law in 2016 requiring
online retailers with no physical presence in the
state to collect sales taxes. (Those with a presence
in the state were already required to do so.) The
court decided 5 to 4 in South Dakota’s favor, allow-
ing states across the country to start reaping billions
of dollars in taxes from purchases made from inter-
net retailers. As states crafted laws allowing them to
tax online retailers, they also extended the levies to
virtual marketplaces such as eBay and Etsy.
The effect has been “huge” for many state gov-
ernments, which have seen other sources of revenue
plummet, says Natalie Cohen, president of National
Municipal Research Inc., a consulting firm. “The two
events together—the Wayfair decision and the pan-
demic—have just exploded online sales revenues.”
Most state governments don’t separate online
sales taxes from other sales taxes in their account-
ing, so it’s hard to calculate the impact nationwide.
But in California, the world’s fifth-largest economy,
online taxable sales more than tripled in the first
half of 2020 compared with a year earlier. In New
York, “a dramatic shift in consumer spending”
led to a significant increase in online purchases,
which bolstered tax collections, according to a
report in February from the state’s comptroller.
North Carolina’s sales tax collections are expected
to jump more than 10% from the previous year.
Eric Kim, head of the U.S. state rating team at
Fitch Ratings, says that the Wayfair decision “could
not have come at a better time” for states and local
governments. Although taxes from online sales
have mitigated their fiscal damage, sales taxes gen-
erally were still slightly down between March and
December, according to the Urban Institute.
Post-Wayfair, Texas and 42 other states that
passed laws allowing for the collection of the taxes
are reaping the benefits. Only Florida and Missouri,
among the 45 states that levy sales taxes, haven’t
moved to collect those dollars yet; bills in both states
are making their way through the legislatures.
Texas, which in July faced a $4.6 billion budget
shortfall, now expects a gap that’s a fraction of that,
in part because of Texans shopping from home.
In the first year of Wayfair-enabled collections,
the state gained about $1.3 billion in sales taxes,
according to Comptroller Glenn Hegar. “That is a
very large piece of the puzzle, especially during a
pandemic,” he says. “Not having that piece would
have been a substantial hit.”
The trickle-up effect from internet purchases
means that local governments in Texas alone have
collected about half a billion dollars in new sales
taxes since the state started remitting them.
“That’s $480 million more [that] local jurisdic-
tions would not have had during a very difficult
year,” Hegar says. Those dollars can go to “provid-
ing police service, fire service—elements that you
and I need every single day.” �Danielle Moran, with
Michael Bologna, a reporter for Bloomberg TaxDATA: TEXAS COMPTROLLER