Taxes In Limbo
Since Washington lawmakers continued a ban on all new Internet-related sales taxes last year, state officials are in limbo pending recommendations from a congressional committee.
Gov. Gary Locke serves on the 19-member task force that is set to meet in Dallas this month. Its recommendations on how to handle the effect of federal, state, local and international taxation and tariffs on Internet transactions and access are due in April.
In Washington state, sales and use taxes on Internet transactions already are a sticky subject.
Theoretically, high-profile companies with a large physical presence in the state are expected to collect sales taxes on their transactions, said Anne Solwick of the Department of Revenue. Meanwhile, consumers who purchase goods over the Net from companies located outside the state are expected to pay use taxes to the state.
In practice, however, the issue is much more complicated than that.
“Trying to enforce it is difficult. … There’s not much of a mechanism,” said Tremane Smith of the Department of Revenue. “If you buy something on the Internet from another state, how would the state of Washington even know?”
It’s also a complex political question for the state. High-tech advancements are driving the Puget Sound’s white-hot economy, which in turn drives the state’s economy. But Washington, without an income tax, also relies more heavily on sales tax revenue than any other state.
“Obviously, the governor realizes that big-time,” Smith said. “It’s a dicey deal.”
Smith said the governor has to weigh keeping a level playing field, whereby traditional “brick-and-mortar” retailers don’t have to charge more for the same items as an Internet sales outfit, with the reality that much of the Internet’s growth stems from work taking place in Washington.
One effort under way that Smith believes could help is a simplification of sales taxes. Businesses now face different sales tax rules in each state.
Washington is working with Utah and Idaho to seek some sort of uniformity in sales taxes, to simplify rules for businesses, Smith said.