Fiscal Bureau: Online Sales Tax Revenue Could Generate Average $52 Income Tax Cut

The average taxpayer could receive a $52 income tax cut if the state were to redistribute about $120 million in new online sales tax collected as a result of a recent U.S. Supreme Court decision, according to a new state study.

A Legislative Fiscal Bureau memo released Monday sheds new light on how state taxpayers would be affected by the recent decision that allows states to collect a sales tax from online and other retailers who sell remotely to buyers in Wisconsin.

The fiscal bureau says it remains unclear whether the state can start collecting the taxes now under an existing agreement it has with 22 other states. A South Dakota online sales tax law upheld by the Supreme Court applies only to retailers who have more than 200 transactions per year or have annual sales in excess of $100,000 per year.

Wisconsin’s online sales tax law doesn’t have those threshold limits in place so the Legislature may have to change the law or the Department of Revenue may have to write new administrative rules, the fiscal bureau said.

Walker said any necessary changes in law would happen in the 2019-21 budget, which will be introduced and passed in the first half of next year after the fall election.

A 2013 law requires the state to cut income tax rates if it reaps new sales tax revenue resulting from “any federal law” change. When the state enacted that measure, there was speculation Congress might change federal law to override a 1992 Supreme Court decision limiting state sales tax to brick-and-mortar retailers in a state. It’s not clear if a Supreme Court decision triggers that income tax rate cut, though the fiscal bureau memo says it’s possible.