The tax no one pays…until now?
WYOMING – The so-called “Amazon tax” bill cruised through the House (45-14) and Senate (26-3) after receiving a 9-0 endorsement vote from the Joint Revenue Interim Committee on January 13. It would require out-of-state vendors to collect sales tax on purchases made by state residents (mostly online shopping) since self-reporting across the state is virtually nonexistent.
Law is nothing new
We all do it. Break the law, that is. For instance, did you mail that Zappos receipt to the Wyoming Department of Revenue (DOR) along with a check for the appropriate sales tax? Probably not. Don’t worry, hardly anybody does.
Sen. Mike Enzi, who has pushed unsuccessfully for federal legislation he believes will level the playing field for local merchants, said, “maybe three a year,” when referring to how many law-abiding Wyoming citizens dutifully report sales and use taxes to the state.
Speaking of use tax, were you aware that when you buy something—say, in Idaho Falls—you are supposed to report this out-of-state purchase with the DOR and pay a use tax. Don’t do that either? You’re in good company.
“Few people are volunteering to do that,” admitted Wyoming Department of Revenue administrator Kim Lovett.
In fact, there is no way the state can keep track of who is and who isn’t paying their fair share of sales and use taxes. It’s a main driver behind HB19, which would put the onus on major cyber retailers to collect and remit sales tax on online purchases generated in Wyoming.
Will online tax really help local businesses?
The Marketplace Fairness Act has been Enzi’s passion since joining the Senate in 1997. Twice he introduced a bill that would remove the shield online retailers enjoy. Twice the bill went nowhere. Most consumers hate it. A recent Gallup Poll showed about 60 percent of Americans don’t want to pay sales tax on their internet purchases. With the 18- to 29-year-old crowd, it’s more like 73 percent. But a majority of respondents admit having to pay sales tax online would cause them to order less from websites and shop more on Main Street.
Without a federal law in place, some Wyoming legislators believe the “sales from remote sellers” bill won't be enforceable. Marti Halverson (R-HD22), who voted against the bill, said, “HB19 just might be challenged in court. There is a debate that, absent a federal law (Enzi’s Marketplace Fairness Act, which has been stalled in Congress for years), HB19 might not be legal.”
That’s just one of the main arguments opponents have for taxing the internet: government overreach. Others were spelled out coherently in a guest opinion column Brett Glass penned for WyoFile last month, calling HB19 “penny wise and pound foolish.” Glass is an internet service provider in Laramie. He argued against the bill at a committee meeting last month.
Skeptics wonder whether legislation like HB19 will really help Main Street, or will it ever bring meaningful revenue to the state after what it will cost the DOR to track and enforce it?
Halverson, for one, looks at two main criteria. Wyomingites don’t necessarily buy online to dodge sales tax. For many in the state, hundreds of miles from a department store, there is simply nowhere to purchase certain items at a brick-and-mortar. Secondly, if coerced to buy locally, some may opt to jump state lines.
“Will this tax help Main Street? Based on my experience, no. There are so many items I need every day that are simply not available at my local Family Dollar or ShopKo,” Halverson said. “During the 2016 Interim, the Joint Revenue Committee heard testimony that this “streamlined sales tax,” as they called it, would, indeed, generate ‘meaningful money.’ Will it? Or will it change our purchasing habits as new taxes often do? I have heard it said that 75 percent of Wyomingites live within 25 miles of the state line. If we must pay a sales tax on our online purchases, why not just run down to Fort Collins, or over to Idaho Falls, or to Billings, Rapid City, or Scottsbluff?”
Poorly understood use tax
Lovett admits most Wyomingites are unaware they are required to pay a use tax on internet purchases and, realistically, all goods purchased out-of-state that are intended for consumption or use in Wyoming.
Here’s how it works (or should work). Let’s say you buy a sweet 54-inch 4K flat screen TV in Denver where the sales tax is 3.65 percent. That beats the 6 percent in Jackson, you think to yourself. Technically, you are supposed to mail in the receipt to the DOR and pay the difference.
What’s worse, you don’t get refunds for overpaying sales tax—something Halverson has found particularly frustrating.
“According to the law, I am supposed to report my out-of-state purchases to Wyoming and pay the Wyoming sales tax. However, in 21 years no one has been able to tell me how to get back the sales tax I had paid in Idaho, [for instance]. I refuse to be double-taxed, so I became one of the thousands of Wyomingites who wasn’t in compliance with the use tax,” Halverson said.
At Idaho Falls’ sales tax rate of 6.85 percent, a Jackson resident would logically expect a use tax refund from Wyoming to the tune of .85 percent. Ain’t gonna happen. It doesn’t work in reverse. “We are not going to give them money back,” Lovett said.
Amazon buckles anyway
HB19 had some bite taken out of it earlier this year when Amazon announced it would begin charging sales tax on Wyoming customers beginning March 1, 2017. The deal is under a voluntary collection agreement between the online retailer and Wyoming. Amazon now collects sales tax in 34 states and the District of Columbia. Most recently, Amazon struck similar deals in Utah, Iowa, Nebraska and South Dakota.
It remains to be seen what sales tax revenue from Amazon will mean for the state. It won't solve Wyoming’s budget shortfalls but it may help some. A study conducted by the University of Tennessee estimated Wyoming’s revenue loss to e-commerce transactions was somewhere around $28 million in 2012.
HB19 is currently in concurrence, meaning both sides of the Legislature tweaked the bill significantly enough that common ground will have to be found. The House, for instance, upped the trigger point in dollar amount from $100,000 to $250,000 in Wyoming sales, and increased the total number of state transactions from 200 to 400.