Key committee rejects online sales tax initiative again, but support may be growing

Key committee rejects online sales tax initiative again, but support may be growing

by
Dustin Hurst
February 29, 2012
Dustin Hurst
Author Image
February 29, 2012

For many years, supporters of allowing states to tax online sales have brought legislation to begin that process, but they have never received at-length hearings on their bills.

This year, they got the hearing, but not the committee approval they sought, though it appears there is growing support to the initiative among legislators. The House Revenue and Taxation Committee rejected a plan to prepare Idaho to collect online sales tax on a 9-9 vote.

There were two other options on the table this year. Rep. Ken Roberts, R-Donnelly, moved to pass the bill, but without the important "do-pass" recommendation to House floor. That was rejected on an 8-10 vote. Rep. Scott Bedke, R-Oakley, asked committee members to refer the legislation to an interim task force for additional study, but that was killed on a tie vote.

The legislation would have given Idaho the ability to collect online sales taxes, but it wouldn't have started the process immediately. Due to constitutional questions about the practice, the United States Congress must first pass legislation allowing it, but the main bill to do that has been stalled for a number of years.

The bill in front of Idaho lawmakers would have only readied the state for when Congress acts.

Alex LaBeau, head of the Idaho Association of Commerce and Industry (IACI), told the panel that Idaho businesses are at a 6 percent disadvantage because they have to collect the state sales tax on purchases, while online retailers enjoy immunity from that. LaBeau said the measure would help Gem State companies compete on a “level playing field” when Congress acts on the issue.

Pam Eaton, director of the Idaho Retailers Association, echoed LeBeau, LaBeau, urging lawmakers to protect local companies and promote fairness. “These are the folks that sponsor the Little League teams. These are the folks that let the Girl Scouts sit in front of their stores,” Eaton said of Idaho’s small businesses.” These are the folks asking for this legislation.”

Estimates indicate the state loses at least $35 million in tax revenue each year because it has no mechanism to collect online sales taxes. It is projected that means Idaho businesses lose out on $583 million in economic activity each year.

In the past, lawmakers have swiftly rejected similar measures, but a number of lawmakers appeared open to exploring Idaho’s options. Rep. JoAn Wood, R-Rigby, said she supported the concept, but would like more work on the details of the legislation. “I see a lot of good things in the bill,” Wood explained. “I feel uncertainty in exactly what we’re doing. I don’t think it’s something we want to explain to the people at home.”

Testimony included a tense exchange between LaBeau and House Majority Leader Mike Moyle, R-Star, over the bill’s readiness. Moyle said that while IACI supports the concept, the group probably hasn’t read the bill and that the unfinished details that make legislation unpalatable.

“I hate it when people love the concept, but hate the bill,” Moyle said. “Why not get it right the first time?”

LaBeau responded that the measure is a starting point for lawmakers and businesses. “I would argue that it’s not a perfect piece of legislation,” he explained. “Our current read is that the legislation is perfect enough for us to move forward.”

Committee chairman Dennis Lake, R-Blackfoot, sided with the LaBeau that the bill is only a step forward and not an end point. “It’s a road we need to go down,” Lake said. “We’ve had it in front of us for five years.”

Moyle persisted, insisting that the bill needs more work. “I think we need everyone around a table and come up with a solution,” Moyle urged. “What Rep. Bedke’s proposed would have a lot people at the table.”

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