Advertising Tax Generates Zero Taxes in Rhode Island

The Providence Business News published an article that I missed in the lead up to Christmas with some very important information about the advertising tax, also known as the Amazon tax or affiliate tax.

The article, ‘Amazon tax’ has not generated revenue, indicates that the state of Rhode Island has apparently not collected any sales tax from their recent advertising tax law.

The revenue at stake from uncollected online and mail-order purchases is significant, though not game-changing. In April, researchers at the University of Tennessee estimated Rhode Island’s government would forego a total of $132.7 million in sales tax revenue from 2007 through 2012. The average annual loss is equal to 2.5 percent of the state’s total sales tax collections in 2007.

But the state law has done nothing to increase tax revenue. Officials at the R.I. Department of Revenue “do not believe that there has been any sales tax collected as a result of the Amazon legislation,” said Paul L. Dion, who heads the department’s revenue-analysis office.

So, there was no benefit to the legislation for the state, but the law did have an impact. Now there is less income being earned, as a result of affiliates being fired. In turn, there is less income for the state to tax.

Let’s hope other states pay notice to the risk of a net loss with the advertising tax.

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