Members of Utah’s retail business community want online retailers to collect sales tax. They say retailers without a physical presence within the state have an unfair advantage over those that do, creating an odd coupling of locally owned ma and pop stores and big box chains – both hurt by Internet marketers who can sell without sales tax added in.
Throughout the United States, brick and mortar businesses and state tax commissions are working to end that advantage made possible by a 1992 Supreme Court decision that said businesses with an actual physical presence must charge sales tax.
As recently as October 13 of this year, “e-fairness” legislation has been introduced in the US Congress that is designed to level the playing field. The Marketplace Equity Act is a non-partisan bill sponsored by Representatives Jackie Speier-D, California and Steve Woman-R, Arkansas. It would allow states to collect sales tax from internet sales that take place within their borders. Local backers of the legislation include Rebel Sports in St. George and The King’s English Bookshop in Salt Lake City.
Opposition to the bill ranges from having to deal with the complexity of all local tax rates, more government intervention, and cost increases that could damage the marketplace. There has also been concern about the burden collecting sales tax could have on small businesses that sell on the Internet. The new legislation exempts small businesses with low levels of Internet sales from being required to collect the taxes.
Local Internet sales company Overstock.com does pay sales tax for purchases made within the state, but does not collect on purchases made outside of Utah. Internet giant Amazon.com does not collect Utah sales tax, giving them at least a 10 percent advantage over local retailers, according to Betsy Burton, owner of the King’s English.
It is estimated national revenue losses from not collecting state and local sales tax will grow from $8.6 billion in 2010 to $11.4 billion in 2012. The Utah State Tax Commission estimates an annual loss of $100 million in uncollected revenue. Utahns are asked to estimate a total of their online purchases made during the year on their state tax return and pay the sales tax, but this has been difficult, if not impossible to enforce.
In 2010, 8200 Utah taxpayers paid $467,000 in taxes they voluntarily reported. Utah is currently working to improve and modernize the collection process with other states in conjunction with federal legislation. Congress has been working on that legislation for more than ten years.
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Source: POLITICO, Salt Lake Tribune, Utah State Tax Commission, Deseret News, University of Tennessee