Research

E-Commerce Tax Revenue in California

Is this the right way to do it?

January 18, 2021

Just as the holiday season looked different to all of us in 2020, so did the means by which we shopped. Instead of lining up early outside of malls and brick & mortar stores on Black Friday, consumers stayed in the comfort of their own homes and turned to the internet for their shopping needs. According to Adobe Analytics, Black Friday online sales totaled $9.0 billion nation-wide, an increase of 21.6 percent from 2019 for a shopping day generally reserved for brick and mortar sales. The momentum continued into Cyber Monday where consumers spent $10.8 billion dollars, up 15.1 percent from 2019. E-commerce sales for the 2020 holiday season totaled $165.6 billion dollars, or $23.2 billion more from the previous year. With the holiday shopping season wrapped up, it is apparent that e-commerce is quickly becoming the preferred means of shopping for Americans.

The acceleration of e-commerce has reignited the conversation in California surrounding the confusing sales tax schemes for collecting and distributing e-commerce sales tax revenue. The current system incentivizes cities to compete against each other for point-of-sale revenue, encourages an over-supply of retail, and contributes to an inequitable distribution of the e-commerce supply chain burden. All these raise the question: Is this the right way to do it?

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