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Consider the Internet sales tax bill

Robb Hicken

Robb Hicken

No problem. Put together a law that requires residents to pay taxes on purchases made in Idaho from another state through e-commerce.

There’s billions to be made. It’ll save the budget, and everyone will feel fine.

Lawmakers see the value, or should I say ‘dollars,’ such a tax would have on the state’s budget. On the outset it appears to be a simple argument. Make people pay tax on purchases. To put a tax in place will take time.

The House Revenue and Taxation Committee, on a 12-6 vote, pushed the issue off for a fourth year in a row.

If someone goes to an appliance store and buys a new 50-inch screen television, it’s almost certain they will be paying taxes on that purchase. The business selling the television records the sale, collects the tax and sends it off to the state coffers.

Collecting taxes from the point of sale is easy when it comes to a walk in customer. State law is already in place to prosecute businesses that do not pay their sales tax.

So, why hasn’t such a tax worked in the past?

States have no teeth in collecting taxes from online sales because Congress has not taken a stand. Next, the issue has come forward, but the leaders can’t seem to get their hands around the concept.

It’s fairly simple. In fact, some stores, like Cabela’s, already pay taxes for online purchases made in the state. The company tracks where the purchase comes from and remits the taxes through its local stores.

Online retailers already collect sales taxes. Each item is calculated and adjusted for the various states where the product will be delivered. The state-by-state taxing is costly, but once it’s calculated, they pay the tax.

Speaking with Democratic Rep. Wendy Jaquet of Ketchum, she says she wants the House to at least give the proposal a fair hearing.

“For some legislators, they see it as a tax increase,” she said. “I see it as Main Street fairness.”

Fact is that’s the name of the bill. The Main Street Fairness Act is a balancer of sorts. The bill would give State Tax Commissioners the ability to work on a multistate sales tax that is more easily applied to Internet and mail-order purchases. Already several states have begun putting together a compact to mandate e-commerce tax collection.

Jaquet says it’s simply put this way. When a business owner has a physical presence in the community, they are part of the community. They give back to the community in more ways than just taxes.

“If I were to buy a dental chair in Oregon, and bring it back to Haley for use, I would have to pay a use tax,” she says. “And, if I bought it online, I would have to pay a use tax.”

Where’s the fairness in that?

The bill was introduced this week in the House Revenue and Taxation Committee, on a 12-6 vote, after virtually identical measures died four years in a row. It was quickly shuffled off to the House Ways and Means Committee, a place where GOP leadership sometimes moves measures they want to quickly scuttle.

Jaquet says many of her constituents see the move as the “death knell” for this year’s bill.

If businesses are to pay sales tax, it should be a fair taxation. The number of e-commerce deliveries in the state grows exponentially annually. If state lawmakers don’t begin to look at the Internet taxation, it will inevitably fall behind other states in having a collection system in place. Lawmakers can bury the issue, but can’t hide from the fact that Internet commerce will continue to grow.
Robb Hicken is managing editor of the Idaho Business Review.

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  1. Thansk for posting this. I found it pretty helpful. I will be checking back soon for updates.

  2. I totally agree in concept and the issue of it being an increased tax is just cowardliness from the legislators. They’re so wrapped up in BS they don’t know how to act as leaders anymore. It’s sad if not pathetic.

    Having said that, I’ve never understood how you can tax an out of state purchase. There’s no political motive here. All of my out of state purchases are with organizations that do add taxes for Idaho, as far as I can remember. But, doesn’t the Constitution prohibit one state from interfering with interstate commerce & does not allow one state to tax such transactions? I’ve always been curious about that. I don’t care either way. I’ll pay my taxes and I have no problem supporting what I consider to be a great country. I don’t want to pay more taxes than others, but so long as we’re all playing by the same rules, I’m in.