Senate backs bill to join talks on Internet sales tax

The Idaho Senate voted unanimously to allow the State Tax Commission to participate in talks with 23 other states who are trying to simplify sales and use taxes to make it easier to collect tax revenue from Internet transactions.

The Senate voted 34-0 on March 2 to pass a bill that would let the commission participate in the Streamlined Sales Tax Project, which is designed to make sales tax policies more uniform in participating states. The immediate goal is to reduce the burden of collecting taxes on companies that operate in multiple states.

Currently, out-of-state companies generally don’t collect sales taxes on the Internet unless they have a physical presence in a state. Consumers are still required to pay taxes on those purchases when they file their taxes, but few do.

Sen. Mike Jorgenson, R-Hayden Lake, said Idaho collects only about $300,000 annually from such use taxes. The tax commission estimates that the state is losing out on about $30 million annually in revenue that is owed from Internet transactions.

But Jorgenson said it’s more of a “fairness issue” for Idaho small businesses.

“Main Street business in Idaho invests the money for brick and mortar, for employees, for inventory,” he said. “And you know what? They’re being used as catalog stores, where people can go down and look at cameras, look at housing (products), then turn around and buy from an out-of-state supplier. Is that fair to Idaho business? And the answer, I hope you’ll agree, is no.”

Under the bill, Idaho could only participate in crafting an agreement. Officials would not be allowed to sign or approve anything without separate legislation in the future.

Sen. Jim Hammond, R-Coeur d’Alene, said the bill would commit Idaho to nothing other than participating in the discussions.

“All we’re doing is saying: ‘Commission, explore this further, and come back to us with a proposal,’” he said. “I’d like that opportunity.”

Former Gov. Dirk Kempthorne signed an executive order in 2005 that allowed state officials to participate in the talks, but the order expired last year.

The measure now goes to the House, which has rejected similar proposals before. A bill in 2008 failed narrowly on a 37-33 vote.

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