LANSING – Michigan’s sales tax revenues topped $7 billion for the first time in history during the 2012-13 fiscal year, a report from the Department of Treasury shows, but the tax base is “being eroded rapidly” by increasing retail sales through the Internet and mail order.
So-called remote sales sapped an estimated $410 million from what the sales and use tax together could have raised in the fiscal year, the report said, and that amount could increase to $463 million by fiscal year 2015-16.
The report said that the sales tax and use tax together amounted to $8.46 billion in the 2012-13 fiscal year, the largest combined tax source in the state.
Sales tax revenues total $7.16 billion, up more than $200 million from the 2011-12 fiscal year. It marked the first time in history the sales taxes topped $7 billion. It was also $3.4 billion more in revenues than the tax netted in 1994 when the rate was increased from 4 percent to 6 percent.
But while sales tax revenues hit a new high that fiscal year, use tax revenues were at their lowest rate since the 2008-09 fiscal year. And they were $273 million below their high in the 2009-10 fiscal year.
The state netted more than $8.4 billion in sales and use taxes, but it also saw nearly $14.8 billion in lost revenues, so-called tax expenditures, because of goods and services that are not taxed, the report said. Of that loss, more than $10.3 billion is foregone by not taxing services, the report said.
While the largest source of tax revenues, 29.2 percent of the $24.544 billion the state collected in 2012-13, the sales tax was slightly below the 29.5 percent of total tax revenues collected in the 2011-12 fiscal year.
The automotive sector provides the largest source of sales tax revenues, bringing in more than $2.265 billion, up 5 percent from the year before. Following auto sales were taxes on non-retail sales, which netted $1.52 billion, up 3.3 percent; then prepared food and meals brought in $1.04 billion, up 3.6 percent from 2011-12; miscellaneous retail sales brought in $733 million, up 2.7 percent; then general merchandise, which netted more than $660 million, up 2.2 percent.
In terms of sales and use tax revenues lost because of mail order and Internet sales, the state could only estimate that figure. But the estimate of $410 million lost is up by $95 million from the 2008-09 fiscal year.
Retailers have been arguing for some years the state should require Internet and mail order sales to have taxes collected. Officials with the Michigan Retailers Association have said they remain hopeful the state will take some action on the issue this year.
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