Small-business advocates are cheering the recent passage of two online sales tax measures in Utah’s Legislature that they believe begin the process of leveling the playing field between Web-based and brick-and-mortar retailers.
“Main Street businesses like mine are at a serious disadvantage because of online-only retailers who refuse to collect sales tax,” said Betsy Burton, owner of the King’s English Bookshop. “The Utah House and Senate have spoken. It is time for Congress to do the same and close the online sales tax loophole.”
Burton’s bookstore at 1511 S. 1500 East in Salt Lake City faces stiff competition from online retail giants such as Amazon.com, where customers can order the same merchandise but avoid paying sales tax.
A nonbinding resolution, sponsored by Rep. Steve Eliason, R-Sandy, urged Congress to approve pending legislation to tax online sales — a task made difficult by the multiplicity of tax rates among cities, counties and states around the country.
HJR14 — passed unanimously by the state House and Senate — took that hardship into account, asking Congress to incorporate key principles into its pending legislation:
• User-friendly tax collection and remittance software
• Immunity from civil liability for retailers using such software
• Aaccountability to a single state tax audit authority
• Simplification of taxable goods categories among the states
• Adoption of a small-business exemption to protect those that sell remotely
• Fair compensation to the tax-collecting retailer
Various competing bills on the issue sit before the U.S. House and Senate, with S1832, the Marketplace Fairness Act, and HR3179, the Marketplace Equity Act, gaining traction in the small-business community.
According to the International Council of Shopping Centers, $23 billion in tax revenue will not be collected unless Congress takes action.
Another bill, HB384, also passed with near-unanimous support from state lawmakers. Sponsored by Rep. Wayne Harper, R-West Jordan, it extends sales and use-tax obligations to out-of-state sellers that have a physical presence in Utah and an online business that sells the same products.
During the recent legislative session, lawmakers were warned that the bill could attract a constitutional legal challenge because of the interstate commerce clause that assigns that regulatory authority to Congress.
David Davis, president of the Utah Retail Merchants Association, characterized HJR14 and HB384 as “important first steps along the path to online and brick-and-mortar sales tax fairness.”
Davis said that HB384 closes a tax avoidance loophole where retailers separate their online sales side from their brick-and-mortar business. He doubts it will draw a legal challenge because it goes nowhere near as far as statutes in other states that have come under fire.
“A federal solution is the right solution,” Davis said, “but in the absence of Congress being willing to act, we feel forced to do some things on the state level.”