Wed., Oct. 14, 2015
Latest estimate on Idaho’s due but unpaid online sales taxes: Up to $50M a year
If Idaho were to join the multi-state streamlined sales tax project, which would allow easier collection of online sales taxes, even without any new federal legislation, the state would collect roughly $1 million to $3 million more in sales taxes a year, Mike Chakarun, tax policy manager for the Idaho State Tax Commission, told the Legislature’s Tax Working Group this morning. If federal legislation now pending passed, requiring online retailers to pay the taxes to each state, Idaho would collect $30 million to $50 million more, Chakarun said. “These are just estimates. No one really knows how big the pool is - it could be less, it could be a lot more.”
Currently, Idahoans are required by state law to voluntarily report their online purchases and pay the 6 percent tax as a “use tax” on their annual income tax returns, but few do. Chakarun said last year, the state collected about $600,000 in those voluntary tax payments. “It’s only a handful of returns that report that,” he said. “We like to joke that they’re all Tax Commission employees.” Amid laughter, the Tax Working Group’s co-chairman, Rep. Gary Collins, R-Nampa, said, “Or legislators.”
Max Behlke, manager of state-federal affairs for the National Conference of State Legislatures, briefed the group about the latest version of online sales tax legislation that’s pending in Congress; it has the votes to pass both houses, he said, but a committee chairman isn’t allowing it to come up for a vote. Idaho already meets the basic requirements under the bill to collect online sales taxes, Behlke said, including having a single entity in the state handle all sales and use tax return processing and audits, having one return that reflects all liabilities for all counties, and having a uniform tax base across the state as far as definitions.
If Idaho were to join the streamlined sales tax project, as more than two dozen other states have, major online retailers could begin collecting and remitting the state sales tax even without federal legislation. Chakarun said the first-year cost to join the project would be about $26,000; there also would be about $250,000 worth of updates to the state’s GenTax system required.
If the Idaho Legislature were to join the streamlined project, Chakarun said, basically, “We need to tweak definitions” in the state’s sales tax laws. Changes wouldn’t be major, he said. Only definitions must be conformed; the state still decides what’s taxable and what’s exempt.
Rep. Robert Anderst, R-Nampa, said, “I think there are some restrictions and consolidations that take place that maybe as a state we aren’t comfortable with.” Rep. Gary Collins, R-Nampa, said, “It’ll be interesting to see if anything gets accomplished federally in the next couple months.”
State Tax Commissioner Ken Roberts told the lawmakers, “This is not talking about a new tax. It’s something that is already due and payable. It’s talking about an effective way to try and collect and remit that tax.”
Senate Tax Chairman Jeff Siddoway, R-Terreton, said, “Over on the Senate side, we’ve never seen any internet sales tax legislation, so we don’t know anything.” Those bills have never made it out of the House Revenue & Taxation Committee in past years.
Siddoway said he understands there are concerns about internet sales taxes. “It probably falls into two camps,” he said. One is lawmakers concerned about a “sovereignty issue.” The other is those concerned about a “fairness issue.” He said he views it as a fairness issue. “If we’re asking the people in the bricks and mortar businesses to collect those taxes, shouldn’t we be asking the people that buy over the internet to collect those taxes and to remit ‘em to the state? My personal opinion on that is yes, that we should collect those taxes,” he said. “But then immediately following that, what do we do with those taxes? And again, I think I’ve heard over and over by this committee, that whatever we do here, we’re not looking for ways to tax our citizens more, tax our businesses more.” He said he’d favor a “revenue-neutral” approach that makes the tax system more fair.
Collins said, “It has not moved on the House side,” largely because there have been “more questions than answers.” He said he doesn’t expect that to change without federal legislation.
Sen. Grant Burgoyne, D-Boise, said he views the matter as a sovereignty issue, saying if a business enters the state over the internet to make money, it should be required to comply with the state’s laws. “When the Supreme Court said they don’t have to, I think that was an attack on state sovereignty,” he said. “There are two sides to that sovereignty coin.”