Idaho is losing about $250 million per year in taxes owed under current law, including $30 million in sales and use taxes that should be collected as part of transactions on the Internet, according to the Idaho Tax Commission.
That uncollected revenue represents 7.3 percent of “the whole pie,” commission chairman Royce Chigbrow told the Joint Finance-Appropriations Committee Feb. 3.
“It does impose an unfair burden on those who pay,” he said. “It erodes confidence in the voluntary tax system and reduces revenues for the state to provide service.”
The commission, which took the estimate about uncollected Internet taxes from a University of Tennessee study, says it could close part of that gap by increasing audits and hiring more compliance workers as well as other tough policy changes, including simplification of Internet tax collection.
Sen. Mike Jorgenson, R-Hayden Lake, has introduced a bill this session that would allow the tax commission to participate in discussions with 23 other states about the Streamlined Sales Tax Project, which aims to simplify sales tax policies to make it easier for out-of-state Internet companies to collect and remit sales taxes to participating states.
Chigbrow said for each $1 million invested in compliance, the commission estimates that it would collect an additional $10 million.
“Unfortunately, the equation works in the reverse as well,” he said.
The commission faces the prospect of a budget cut during the fiscal year that begins in July, with a proposed appropriation of $31.9 million, about $250,000 less than originally budgeted for the current fiscal year.
The agency has also been cutting back to meet mid-year budget holdbacks by Gov. C.L. “Butch” Otter, leaving 30 vacant positions unfilled, ordering seven furlough days, reducing certified mail expenses and terminating a contract on a backup copy machine, Chigbrow said.
Next year, he said the agency plans to cut another 10 full-time positions from its staff of 413.5.
At the same time, the commission has received about $1.9 million in one-time money over the past year to hire temporary audit staff to collect more revenue. The Legislature appropriated an extra $425,000 this year, and the governor pushed for a one-time boost of $1.5 million.
Those temporary workers have collected about $9.9 million so far and are on pace to bring in close to $20 million by the end of the fiscal year, more than the $17.5 million expected.