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Utah bill to notify Web buyers of sales tax fails 2nd time

Published February 17, 2012 7:19 pm

HB385 • Opponents favor a federal solution to the problem.
This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

For 35 years, the Kings English Bookstore has thrived in a Salt Lake City neighborhood. But owner Betsy Burton voiced frustration on Utah's Capitol Hill on Friday about online retailers who get a competitive edge because they don't collect sales tax.

Even after she spoke, the Internet merchants won another political round over the issue.

"If things don't change — and Internet taxation is a large part of what needs to change — we won't be here anymore," Burton implored members of the House Revenue and Taxation committee. "You can't expect a business of any size to operate at a 10 percent disadvantage over time. It just can't happen, and we can't exist."

Burton, whose store is near the intersection of 1500 East and 1500 South, spoke in support of HB385, sponsored by Rep. Wayne Harper, R-Harper, which would require online retailers to post notice at the time of a purchase that the buyer might owe sales tax.

In Utah, consumers are required to remit sales tax for online purchases when they file their annual income tax returns, but the lack of an enforcement mechanism means that few actually do.

Despite Burton's pleas, the committee voted 10-5 against the measure, with one lawmaker, Rep. Joel Briscoe, D-Salt Lake City, acknowledging that he'd been "heavily lobbied" on the issue. For a second time this week members had amended the bill, only to vote it down. Monday's tally was six for, seven against.

Jonathan Johnson, president of Utah-based online retailer Overstock.com, spoke against HB385, which is similar to legislation passed in four states. One, Colorado, is facing a constitutional challenge over interstate commerce concerns.

"As these bills proliferate — and so far each one has slightly different language — our product pages or somewhere in the transaction will have a host of notices," Johnson said. "That will clearly hurt sales."

Johnson, whose Cottonwood Heights company employs 1,300 people, said he instead prefers a federal fix and has been wearing out shoe leather in the halls of Congress, where various online sales tax measures are being considered.

Johnson hopes the Washington remedy will include a plug-and-play software solution that enables Web retailers to collect the correct tax in the face more than 10,000 different taxing jurisdictions in the United States and many more across the globe.

Rep. Harper, who has worked on the problem for more than a decade, favors the Marketplace Fairness Act, a federal bill sponsored by Sen. Dick Durbin, D-Ill., and others. That legislation would require online retailers to collect sales tax at the time of purchase.

cmckitrick@sltrib.com

Twitter: @catmck