tn capitol illo

An evident side effect of the pandemic has been the record rate by which people are buying and selling goods online.

Consumers spent more than $860 billion with online U.S. retailers last year. That was up 44 percent from 2019 as spending patterns changed rapidly during COVID and digital platforms simplified the shopping experience and empowered third-party vendors with more sales and marketing tools. Amazon marketplace sellers — which account for 50 percent of all sales on the online retail platform — shipped 3.4 billion products last year and averaged $160,000 in sales. Social selling on platforms such as Facebook, Instagram and Snapchat also took off, with many sites now offering product and sales services to anyone with a login. You can now even pay your favorite local journalist — cough, cough — on Twitter.

With the tools of the trade so easily at the disposal of most people with internet access, technology has made it easier for people to make an extra buck from their hobbies and skill sets. Only time will tell how many of the record number of ventures launched in the past 15 months will survive long-term — historically, about 80 percent of new businesses in Tennessee are still operating a year later — but it’s clear the state is benefiting from the rise in e-commerce and will continue to do so.

In March 2020, a bill drafted by the National Conference of State Legislatures and sponsored on Capitol Hill by Sen. Jack Johnson added a provision to state tax laws requiring marketplace facilitators — Ebay, Facebook Marketplace, Etsy, Uber Eats, Postmates, etc. — that have more than $100,000 in sales in Tennessee to report and remit sales tax on behalf of their vendors. Reviewed prior to any notion of a pandemic arriving, the bill was expected to bring the state $84 million in previously uncollected tax dollars in its first year.

Since it was enacted last October, the state has received more than $160 million in sales tax from marketplace facilitators, about a third of which the state believes was already being collected. Even so, marketplace tax collections are set to exceed estimates by $131 million by the end of the year, according to the Department of Revenue.

The growth has helped lift state tax revenues 14.7 percent so far this year, with Tennessee now on pace to collect an unplanned $1.3 billion surplus by the end of June.

“The pandemic-led increase in online sales has led to a strong increase in the number of non-store retailers nationwide, as consumers have dramatically shifted toward online shopping, likely explaining part of the increase in new entity filings,” the state’s most recent quarterly business and economic indicator report said. “Strong sales tax collections have also been driven by recently implemented legislative changes requiring marketplace facilitators to collect sales tax on online transactions on their platforms.”

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