March 10, 2010 in Idaho

North Idaho lawmakers spar over online sales tax

By The Spokesman-Review
 
Betsy Russell photo

Rep. Leon Smith, R-Twin Falls, answers questions from Rep. Jim Clark, R-Hayden Lake,about the streamlined sales tax bill he’s co-sponsoring to position Idaho to eventually be able to collect sales taxes on Internet sales. The bill - identical to another that earlier passed the Senate unanimously - was introduced in the House Rev & Tax committee Wednesday on a 10-8 vote.
(Full-size photo)

BOISE - Two lawmakers from the same North Idaho district are at opposite ends of a legislative battle over Internet sales taxes - which Idahoans already are required by law to pay, but almost no one does.

Technically, Idaho’s missing out on an estimated $30 million a year in sales taxes on online, catalog and other remote sales because the Idaho buyers don’t report and pay the taxes on their state income tax returns. But that requirement isn’t enforced, and the state long has acknowledged that it’ll take national action to reform the sales tax system enough to go after taxes on those sales.

Enter the Streamlined Sales Tax project, an effort started by the National Governors Association and the National Conference of State Legislatures in 1999 to get states together to figure out how to conform their sales tax laws to allow eventual Internet sales taxes, and to pressure Congress to act. Twenty-three states, including Washington, are part of the project, but Idaho lawmakers have repeatedly defeated legislation to join in.

Sen. Mike Jorgenson, R-Hayden Lake, this year pushed legislation through the Senate - and got a unanimous vote - to have Idaho join. On Wednesday, the House Revenue and Taxation Committee, which maintains tax-related bills should start in the House, not the Senate, introduced a new bill that’s identical but for its title. Rep. Jim Clark, R-Hayden Lake, led the debate against the measure, which was introduced on a narrow, 10-8 vote.

“We really can’t do anything until Congress does something,” Clark declared. He’s the state director for the American Legislative Exchange Council, a conservative association of lawmakers that strongly opposes the project. Clark, a seven-term lawmaker who is retiring after this year’s session, said the project smacks of efforts to create a national sales tax.

“He told me when I first introduced it that he was going to kill the bill - that he’s done it at least six times before, and it’d give him great joy to do that,” Jorgenson said of Clark. Asked what he thought of that, Jorgenson said, “Well, he won’t be here next year.”

Jorgenson added, “Certainly I have no pride of ownership, and if getting it through requires that it originate in the House rather than the Senate, that’s fine by me.”

In the House committee on Wednesday, a bipartisan pair of lawmakers, Reps. Leon Smith, R-Twin Falls, and Bill Killen, D-Boise, urged the introduction of their new version of the bill.

“It’s pretty simple - it just puts a tax commission representative at the table for the streamlined sales tax discussions,” Smith said of the bill.

Idaho was a participant in the project briefly under then-Gov. Dirk Kempthorne, who issued an executive order to accomplish that; but lawmakers never signed on.

Killen said Idaho merchants want the taxes collected. “They’re operating at a 6 percent disadvantage,” he said.

Meanwhile, more and more of Idaho’s sales are happening online rather than at brick-and-mortar stores, Killen said, a trend that threatens the state’s tax base. Sales and income taxes provide 95 percent of the funding for Idaho’s state government, while property taxes fund local government operations.

Though the entire state Senate is in favor of joining the streamlined sales tax project, House GOP leadership has sided with Clark against it.

House Majority Leader Mike Moyle, R-Star, said he doesn’t think it accomplishes anything. “Until Congress acts it does nothing more than waste state tax dollars to send people on junkets all over the country,” Moyle said.

Smith said the whole Senate likes the bill, 23 other states like the bill, and “every merchant in the state of Idaho would like to see this.” So, he asked, “Who doesn’t like the bill? Internet buyers … who basically cheat on their taxes.”

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