Some vendors outside Idaho are more likely to need to collect sales taxes on online purchases made in Idaho, after a House of Representatives vote.
Bill H578, sponsored by Rep. Lance Clow, R-Twin Falls, directs some online vendors – those which do not have a presence in the state but which have at least $10,000 in sales in Idaho, as well as an in-state affiliate who helps with sales — to collect sales tax on online sales made to Idaho residents. Previously, only vendors with a presence in the state, such as an office, needed to collect sales tax on online purchases, based on a 1992 Supreme Court decision, Quill Corp. vs. North Dakota.
“I’m the guy who helped stall this bill for years, but things have changed,” said Majority Leader Mike Moyle, R-Star. “This helps honest people stay honest.”
That’s because the existing law doesn’t let Idaho residents who shop online off the hook. They are supposed to report online sales on their Idaho income tax form and pay a use tax. But in practice that rarely happens, if only because it requires saving online receipts for an entire year. “The tax is due,” said Rep. Jason Monks, R-Meridian. “We’re just simplifying how it’s collected,”
A number of Idaho brick-and-mortar retailers supported the bill because otherwise they said they operated at a disadvantage to online retailers.
“If you’re going to tax businesses for performing retail sales, you have to tax all businesses,” said Gaylon Hughes, owner of Wilson’s RV Repair, in Boise. “Otherwise you’re picking winners and losers.” His company sells parts for recreational vehicles, some of them priced at $800 to $900, and his customers tell him they will order them online so they can save $40 to $50 on sales tax, he said. “In our industry, there’s a lot of smaller retailers out there who are setting up businesses in their house and selling parts, and they have a built-in price advantage.”
The Boise Metro Chamber and the Idaho Chamber Alliance support the bill, said Ray Stark, senior vice president of the Boise Metro Chamber.
Clow estimated that the state is losing $22 million to $37 million annually from unpaid sales taxes on online purchases. At the same time, bill sponsors hedged their bets by recommending that no appropriations in fiscal 2018 should rely on this anticipated revenue. The Idaho State Tax Commission doesn’t have information on how much online tax is unpaid, but more than 11,500 taxpayers reported use tax of more than $850,000 on their 2016 income tax returns, said Renee Eymann, public information officer.
The bill passed with a vote of 46-21 after a lengthy debate. Opponents Reps. Ron Nate, R-Rexburg, and Vito Barbieri, R-Dalton Gardens, suggested the bill violated the law by charging an interstate tariff and warned Idaho could now increase taxes on out-of-state purchases.
Others, such as Reps. Priscilla Giddings, R-White Bird, and Greg Chaney, R-Caldwell, recommended the Legislature wait until next year to pass the bill, because the Supreme Court has said it will rule in June on a South Dakota case widely expected to overturn Quill. But Clow and Moyle said they were confident that the Supreme Court ruling wouldn’t affect H578.
The bill will now move to the Senate side of the Capitol and, if approved there, to Gov. C. L. “Butch” Otter for his signature.