Facts on Internet Purchases

• Every state with a sales tax has a companion tax for purchases made outside the state. In Michigan, that tax is called the "use tax" but might be more aptly described as a remote sales tax because it is a 6 percent tax owed on sales made remotely (i.e. outside of Michigan.)

• The use tax is not a new law; it was enacted in 1937. With the birth and rapid growth of Internet sales, revenue lost from non-reporting of the use tax is becoming substantial.

• Remote selling to consumers nationally is estimated at $325 billion in 2007. By 2009, projected remote selling to U.S. consumers will grow to $430 billion, largely due to sales over the Internet.

• Currently, Michigan is losing an estimated $510 million in use taxes from remote sales in fiscal year 2007. Remote sales over the Internet will cause this loss to increase dramatically in the years ahead to $349 million in FY 2007.

• The estimated loss of $349 million is comprised of $210 million from the School Aid Fund and $300 million from the General Fund.

• Use tax is required by law when a person purchases a good from out of state and the retailer hasn't charged sales tax in their jurisdiction.

• Non-compliance has been a problem for years with mail order sales, but the issue of "remote selling" becomes much more serious with the fast growth of Internet sales.

• The Internet Tax Freedom Act does not prohibit the sales and use tax on consumer purchases over the Internet by Michigan residents that are taxable under Michigan law. Only new taxes on Internet access are prohibited.