Idaho may be missing out nearly $65 million a year in taxes that legally are due and payable. That’s the estimate of use tax due on Idaho residents’ Internet purchases, which are subject to the state’s 6 percent “use tax” if the online sellers don’t charge sales tax. People are supposed to report and pay those taxes on their next income tax return, but few do. The law’s been on the books for years, since long before there was an Internet.
More than 9,600 Idahoans paid the tax on their 2012 state income tax returns, paying more than $544,000. But that number is estimated to be a fraction of what is owed. In tax year 2011, 9,555 Idaho tax returns reported “use tax” on such purchases, averaging $56 per return. But there were about 700,000 returns in all, putting compliance at a measly 1.4 percent. And that’s up from previous years; in tax year 2010, 8,900 returns reported use tax averaging $53, and in tax year 2009, there were 8,200 averaging $48.
The Idaho Legislature has been debating the issue for years, pushed in part by Idaho retailers who complain that customers come in and browse their goods, then make their purchases online to avoid the state sales tax – sending those dollars out of state. This past year, the House Revenue and Taxation Committee voted 10-5 against introducing a bill designed to set the state up to collect the tax directly from retailers if Congress gives the OK. The bill was backed by the Idaho Association of Counties, the Association of Idaho Cities, the Idaho Association of Commerce and Industry, the Idaho Chamber Alliance, and the Idaho Retailers Association.
For now, the state Tax Commission is reminding holiday shoppers to keep track of their untaxed online purchases and report them when they file their next Idaho income tax return; you can read my full Sunday column here.