The internet has opened up a world of shopping opportunities for people in rural towns like ours, but it’s a double-edged sword that cuts into communities in multiple ways. Beyond local retailers receiving less business and dollars leaving the local economy, under the current set-up, Wyoming’s governments also lose out on sales tax dollars to maintain or improve their towns, cities and counties. Some estimates say that, by not requiring online retailers to collect sales taxes, the State of Wyoming is losing $28 million a year.
There is little that government can do to keep money in local communities or away from e-commerce; it’s a free market and people should be allowed to spend their dollars wherever they see fit.
But the Wyoming Legislature can and should do something about the lost taxes.
Proposed House Bill 19, “Sales from Remote Sellers,” would require out-of-state businesses to start collecting sales taxes on Wyoming residents’ purchases and then send that money to the State of Wyoming.
Across the country, some opponents of the idea like to call it an “Internet Sales Tax,” but that’s not what this is at all.
It would be a whole lot more accurate, though decidedly less catchy, to call it something like, the “Treating All Businesses Equally and Giving Consumers a Hand with Paying Their Already Required Sales Taxes” bill.
Remember that it’s not the businesses that are being taxed — it’s us, the consumers. And right now, we’re skipping out on our tax bills.
Under current law, every time you go on a shopping trip in Billings or place an order at www.YourFavoriteSite.com and aren’t charged any sales tax, you’re supposed to fill out a “Wyoming Consumer Use Tax Return – Form 44” for your purchases; then you should send both the form and the sales tax you owe to the Wyoming Department of Revenue.
“You have to admit that probably 99 percent of the people who buy from somewhere else don’t do that,” Rep. Sue Wilson, R-Cheyenne, said during debate in the House last week. We’d guess her estimate might even be a little conservative.
The fact is we’re used to having our sales tax automatically tacked on to our purchases. Asking people to remember (and get up the motivation) to fill out a form and pay small amounts of taxes multiple times a year is both obnoxious and unrealistic.
Some opponents argue it’s unfair to shift the burden of tax collection to out-of-state businesses. But businesses already deal with sales tax collections anyway and we’d suggest that when someone chooses to do business in Wyoming — and that’s what they’re doing when they sell products here — they’re agreeing to follow our laws. And our laws say that sales are taxed at a rate of between 4 and 6 percent.
Supporters of House Bill 19 say software developed by a consortium of states makes collecting taxes across the country a relatively painless, cost-free process for online retailers. Businesses certainly have a right to demand and expect that to be the case.
If the bill passes, legal challenges are likely and some Wyoming lawmakers voiced concern about whether the use tax will stand up in court.
Current U.S. Supreme Court precedent — dating back nearly a quarter-of-a-century — suggests retailers might have a strong case, but there are some indications that the court may be more open to the idea today.
It would obviously be better if Congress resolved the issue, once and for all. But despite years of advocacy from people like Wyoming’s senior senator, Mike Enzi, federal legislation like the Marketplace Fairness Act has gotten little traction.
The slow progress could be due to those who try to spin it as some horrific new tax. When Hillary Clinton and Donald Trump both hinted on the campaign that they might be willing to help states in getting retailers to collect sales taxes, Heritage Action (an arm of the Heritage Foundation) blasted out an alert under the headline: “Presidential Campaigns Urge New Taxes on Internet Sales.”
In the June alert, Heritage Action CEO Michael A. Needham described the concept as “doling out favors to well-connected businesses and revenue-hungry state governments.”
But if anyone’s getting a favor, it’s really the online businesses, who, under the status quo, don’t have to follow the same rules as brick-and-mortar stores when they do business in Wyoming.
When state lawmakers took up House Bill 19 last week, they posed several good questions about the legislation, including about a provision that says out-of-state businesses only have to collect the tax if they make more than 200 sales or $100,000 worth of sales in Wyoming each year. (Rep. Michael Madden, R-Buffalo, said perhaps no more than 50 businesses would meet that criteria.)
Legislators are wise to work toward making the bill as fair and hassle-free as possible, but we’d encourage them to not lose sight of the end goal: It’s time to put all businesses on equal footing.