Utahns by law already are supposed to pay sales tax on any online purchases they make by voluntarily adding it to their state income tax returns. Few do. Sen. Curt Bramble, R-Provo, recently said a few honest Utahns paid about $200,000 total last year out of the estimated $80 million to $350 million owed.
Currently, merchants selling products online must collect sales tax only if they have a physical location — such as a store or warehouse — within the state where the purchase is made.
Sen. Wayne Harper, R-Taylorsville, sponsor of SB65, said it would require online sales platform companies such as Amazon or eBay to provide a list quarterly to the Utah Tax Commission of all separate firms and individuals using their services that made at least $2,500 in online sales to people living in Utah.
The bill then requires the tax commission to send letters to those sellers reminding them of Utahns' obligations to pay tax on those sales, and urging them to notify buyers in Utah of that responsibility.
"This is an informational thing to let retailers and consumers know that this tax is due and payable," Harper said.
But the coalition of conservative groups wrote that it "is a nuisance reporting requirement in order to give Utah tax collectors information that they'd then use to collect use tax, and would create a host of economic, logistic, and Constitutional problems" caused by asserting tax authority on out-of-state businesses.
Harper said other states have passed similar bills, and court cases have struck down some as unconstitutional but upheld others.
He said he is pushing it because "you shouldn't have a business out there saying, 'Buy from me because you can avoid the sales tax,'" but that is happening.
"Government is going through and creating winners and losers with tax policy and we shouldn't be doing that. We should be treating every person and every transaction the same," he said.
Bramble, who is president of the National Conference of State Legislatures NCSL), said earlier this month that states are about to launch a national drive to make companies collect tax on all Internet sales and remit it to the states. He expects several Utah bills to address the problem in various ways.
But Bramble expects at least one bill to closely mirror NCSL preferences designed to increase the likelihood that expected lawsuits over such legislation would lead the U.S. Supreme Court to overturn previous decisions that have limited online sales tax collection.
Bramble said the real intent is to urge Congress to act on a national solution. He said if numerous states start passing bills of their own — which may create many different rules around the country — it might just bring enough pressure on Congress to act.
Other groups that joined in the letter opposing collecting online sales tax include: the Jeffersonian Project, R Street Initiative, American Council for Capital Formation, American Encore, Americans for Constitutional Liberty, Center for Individual Freedom, Coalition Opposed to Additional Spending and Taxes, Competitive Enterprise Institute, Digital Liberty, Federalism in Action, Frontiers of Freedom, Generation Opportunity, Hispanic Leadership Fund, Less Government, the LIBRE Initiative, Taxpayers Protection Alliance and the Tea Party Nation.