The State of Rhode Island has a special legislative commission to study the possible repeal of sales tax! That should sound shocking since states with a sales tax typically generate at least 25% of their General Fund revenues from the sales tax. What might lead a state to consider dumping a longstanding revenue generator? Well, we do hear a lot about problems with the sales tax including:
♦ It’s eroding base of tangible personal property in a digital/services world of today.
♦ It’s tax gap generated from e-commerce and catalog sales where many vendors have physical presence (and thus tax collection obligations) in only one or just a few states.
I don’t think these problems are reasons to repeal the tax though, but instead to reform it.