Taxing online sales not appealing to primary election candidates

Taxing online sales not appealing to primary election candidates

by
Mitch Coffman
May 9, 2012
Mitch Coffman
May 9, 2012

Remember when the experience of shopping involved driving, walking and browsing from store to store looking for the perfect gift or necessary purchase? Those days are going, going, and may be pretty much gone in coming years. Shopping is increasingly about convenience and selection at your fingertips, compliments of the Internet.

While precise online and retail sales figures are a bit of a moving target, it is estimated that there were $194.3 billion in online sales in 2011 out of a total retail market of $1.8 trillion, or about 11 percent of total sales. Plus, analysts say online sales are expected to grow by 15 percent annually for the foreseeable future.

Just for the sake of discussion, if online sales of $194.3 billion were taxed at 6 percent, the return would be $11.7 billion.

For a number of years, the biggest shopping day of the year was Black Friday, the day after Thanksgiving. Analysts now say that Cyber Monday, the Monday following Black Friday, has become the other major shopping day of the year with sales in 2011 exceeding $1.2 billion.

This year, legislation was considered by the state Legislature to ready Idaho for having an online sales tax. The bill died in committee. The state, due to constitutional questions about the issue of interstate commerce, would have had to wait for the United States Congress to pass enabling legislation, but the main bill for that has been stalled for years.

Nevertheless, the issue seemingly will come up again, especially with IACI president Alex LaBeau telling legislators that Idaho businesses are at a 6 percent disadvantage to online outlets. LaBeau’s point is that a storefront business in Idaho is required to collect a 6 percent sales tax; an online outlet is not. IACI is widely considered the most powerful business lobbying group in the state.

In addition, Idaho Gov. Butch Otter says he favors the state adopting some sort of an Internet sales tax.

The Idaho Freedom Foundation asked candidates running in the May 15 primary if they would support collecting sales tax on Internet sales by participating in the national Streamline Sales Tax Project.

The Streamline Sales Tax Project objective is to simplify and modernize sales tax policies across the United States, specifically in taxing of online sales. Currently, 24 states have passed legislation to participate in the project.

Thirteen candidates supported the idea, 43 were opposed to it and 20 said they were unsure. Several chose not to answer the question.

Supporters believe that local businesses, referred to as “brick and mortar” retailers, are being hurt by online sales not being taxed and believe taxing those online sales is fair. In addition to a sales tax advantage enjoyed by online retailers, state and local businesses often have business and occupation taxes to pay, unlike their Internet competitors.

Jarom Wagoner, a Republican running for a seat in the House in District 10, said an Internet sales tax seems fair and “levels the playing field.” Said Wagoner, “The more I think about this sales tax, the more in favor I am of it. It essentially levels the playing field for all businesses. By not collecting a sales tax, you are essentially providing special tax breaks for online retailers, and in this instance I do not believe this provides for a long lasting positive impact for our state.”

Opposition to taxing online sales fell into two categories. One, this is just another way for the government to tax and collect more money. Two, the government should stay off of and away from the Internet, believing that not only should the government not regulate the Internet in any manner, but technology always grows faster than the government can keep up with.

Those simply against the tax as being just another tax were very direct as to why.

Michael Law, a Republican running for the House in District 22, says it’s just more taxes, which he opposes. “More taxes. I oppose any increase in taxes. Part of the reason for an Internet sales tax is that local businesses may find it hard to compete. A better way to help local businesses would be to lower sales taxes and lower corporate taxes, rather than harm the citizens by forcing them to pay more in taxes.”

The candidates who were unsure about the idea of taxing online sales seemed to be torn. On one hand, they believed something needed to be done to help local state businesses. On the other hand, they weren’t sure about, essentially, regulating the Internet.

K. LaVon Dresen, a Republican running for a House seat in District 35, summarized that sentiment. “I don't like the fact that we are losing revenue to business outside of Idaho. I also don't like the thought of government becoming involved in the Internet. Where would we draw the line? It could become a slippery slope.”

Note: IdahoReporter.com is published by the Idaho Freedom Foundation.

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p 208.258.2280 | e [email protected]
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