Retail sales took a big dive during shelter-in-place restrictions. That much was expected.
U.S. Commerce Department data shows that the pain was not distributed evenly. Clothing retailers lost more than half of their sales in March, while furniture stores, restaurants and motor vehicle parts stores experienced a drop-off in the 25% range. In all, retail sales fell 8% in March, but April could be worse when those numbers are reported.
Some retail industries fared better, namely grocery stores and pharmacies. In addition, Amazon’s revenue rose 26% in the first three months as Americans ordered more packages while they were stuck at home. The online retailer’s income dropped, however, because of all the people hired to handle the shipping and delivery demand.
Amazon will survive, but the future looks grim for local and state governments that rely on sales tax collections. In Missouri, these retail trends might prove especially disappointing and unnecessarily painful. That’s because groceries are taxed at a lower rate and Missouri is among the few states that failed to take action after a 2018 Supreme Court ruling opened the door to taxation of online commerce.
Of states that already collect a tax on bricks-and-mortar retail, only Missouri and Florida have not authorized an “economic nexus” law that allows for collection of an online tax if sales exceed a certain level.
Gov. Mike Parson put his support behind the concept last year, but the measure didn’t advance to his desk. This year, multiple proposals languish with one week remaining in the legislative session.
The Missouri Department of Revenue estimates that the state would gain $90 million to $145 million in revenue from taxing e-commerce, though some legislative proposals would offset that amount with an income tax cut. Even with that offset, local governments, including St. Joseph and Buchanan County, stand to gain additional revenue for needed services like infrastructure and public safety.
In the wake of COVID-19, it makes little sense to resist an online tax when painful budget cuts loom for every level of government. The coming recession could spell doom for some bricks-and-mortar stores, a development that would push even more retail commerce online.
Two decades ago, the state had plenty of good reasons to remove the tax on groceries, in order to benefit low-income Missourians who spend a large portion of their earnings on food.
There’s little justification for absence of an online tax, and the coronavirus makes the case for the status quo even weaker. Lawmakers have one week to advance legislation that is needed more than ever right now.