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Several Utah Senate leaders visibly squirmed at the question: Do they, as Utah law requires, report how much sales tax they technically owe from online purchases and pay it through their state income-tax returns?
Only two of the top leaders at a daily press availability volunteered that they do: Sens. Curt Bramble, R-Provo, and Wayne Harper, R-Taylorsville who both happen to be sponsoring bills on the issue.
Others sat quietly.
Even with that, senators appear more likely than most to pay that uncollected online sales tax. After all, Utah collects only about $200,000 a year from a few honest souls, out of an estimated $80 million to $350 million owed.
So Bramble is leading a charge not only in Utah but also nationwide to make online companies automatically gather and remit sales tax on goods they sell to buyers' home states which is opposed by a who's who of conservative groups. The Utah Legislature is considering three bills to help accomplish that.
Bramble's side depicts critics as essentially tax cheats seeking unfair advantage for online businesses. Conservative groups depict Bramble and others as promoting taxation without representation on businesses outside their borders.
The problem • Bramble is president of the National Conference of State Legislatures (NCSL) and is coordinating an effort among state lawmakers across the U.S. to force online retailers to collect the tax everywhere. The hope is that these efforts will prod Congress to adopt national legislation.
He said as more and more sales are made online, the state is collecting less and less of the sales tax owed and that is hurting its ability to deliver services.
Currently, merchants selling products online have to collect sales tax only if they have a physical location such as a store or warehouse within the state where the purchase is made. The vast majority of online sales do not automatically collect sales tax. That's one reason that online sales are growing.
"In every state that has a sales tax, there is a requirement that citizens remit sales tax based on their purchases and if the tax is not charged at the time of online sales, they have to accumulate that data and remit it with their state income-tax return," Bramble said. "That's true throughout the country."
But people usually don't pay those taxes voluntarily.
"It's a growing concern because online sales are increasing," said Rep. Mike McKell, R-Spanish Fork and sponsor of one online-tax bill. "They are increasing by double-digit percentages each year," shrinking actual state sales-tax collections.
And there is the issue of fairness between online and bricks-and-mortar merchants.
Harper said many brick-and-mortar retailers talk about customers who come in to look at their products, enter information in their smartphones, and then order it online to avoid paying sales tax.
"What we are talking about is treating all taxpayers the same, whether you buy a book at Sam Weller's … or Amazon or eBay," Harper said. "Some of those are being taxed; some are not."
Solution? • Two bills, SB85 by Harper and HB235 by McKell and Bramble, seek to make online retailers collect tax and remit it where the buyer lives, using somewhat different methods and justification. Harper also has SB65 to gather data about uncollected sales tax while prodding online sellers to urge buyers to pay it.
McKell said his measure "is revenue-neutral. Essentially, my bill will actually reduce the general sales-tax rate at the same time we collect more sales tax from online sellers."
The idea is to broaden the base of what is taxed, and lower the overall rate. So as Utah starts taxing online sales, it reduces the rate on everything including at area brick-and-mortar stores.
Bramble noted the Legislature previously passed a law already requiring the state to drop sales-tax rates if it manages to automatically tax all online sales to prevent a revenue windfall.
McKell and Bramble say their bill is based on a New York law that survived court challenges, and the U.S. Supreme Court refused to consider it so they view it as legal.
"The bill will not generate new revenues for the state of Utah," McKell said. "But it will fix the problem, and create fairness in the marketplace so online retailers are not given an advantage over brick-and-mortar stores. And it certainly brings more stability to our state budget."
Bramble said the real goal is to prompt Congress to act, and enact one national solution and system instead of seeing 50 separate ones in the states. He said NCSL and states like one such bill proposed by Rep. Jason Chaffetz, R-Utah. But he said Congress has shown no willingness to move.
"Everyone doing their own thing is the worst possible solution until you consider no solution at all would be the only thing worse," Bramble said. "But if a number of states move forward, our hope is that Congress will see the wisdom of finally pursuing the Chaffetz bill."
Opposition • A coalition of more than 20 national conservative groups opposes all of the online-sales-tax bills before the Legislature.
Groups including Americans for Prosperity, FreedomWorks, the National Taxpayers Union and Americans for Tax Reform joined in a letter calling those efforts "constitutionally suspect and practically unwise." It said if they become law, it may keep some online sellers from offering goods to Utahns.
"Allowing the state to tax businesses with no physical presence in our state is taxation without representation at its finest," said Evelyn Everton, Utah director for Americans for Prosperity. "It would expand state taxation authority to businesses far beyond our own borders, raising costs on people who have no ability to weigh in on the rates being charged. Passing this bill isn't about 'leveling the playing field,' it's about expanding state power far beyond our own borders."
Bramble countered that the tax is on the buyers who live in Utah and is something they have always legally owed. It just hasn't been collected by online merchants, and few Utahns pay it as required through income-tax returns.
Poll • Everton pointed to a new poll by Vrge Analytics paid for by NetChoice, a consumer-advocacy group of 601 Utah voters in January as evidence that Utahns do not favor automatic collection of online sales tax.
It found that 71 percent of Utahns oppose legislation to collect online sales tax, 77 percent favor the current system, and 67 percent would view collecting online sales tax as a tax increase.
"Utah lawmakers would do well to listen to the loud and clear message and mountain of evidence that voters oppose misguided Internet sales-tax bills," said Andrew Moylan, executive director of the conservative R Street Institute.
He added that the poll shows "conclusively that, among ordinary Utahns, such proposals are viewed as little more than a power and money grab."
Even though Bramble and others say changes would be revenue-neutral and not a tax hike, Everton said at the same time "they speak about the revenue the state is losing by not forcing online retailers to collect sales taxes. It can't be revenue-neutral if it is ultimately making up that revenue."
A hearing on one bill, SB65, was withdrawn recently by Harper because of what he said was "gross misinformation" by opponents, so he could work to build support before another hearing. No other hearings have yet been scheduled on his bills.
The bill by McKell and Bramble is still in the House Rules Committee. It has not been sent to a standing committee for a hearing.