Updated: May 2
The following are excerpts from a letter to constituents on March 19, 2015
With this letter, I hope to further explain one issue that has been in the news in the past two weeks. Education and Transportation continue to be the big news items, while other legislation seems to make headlines. One bill that I introduced this last week is the Streamlined Sales Tax Simplification Act, HB 283.
The topic of taxes always seems to generate discussion and this one is no different. Most opponents of the Streamlined Sales and Use Tax issue will argue we do not need to tax the internet.
So, let’s begin with that issue. This is not a tax. It does not tax property any different than what is currently required by Idaho Code. Streamlined Sales Tax Simplification modifies Idaho Code to simplify the ability of out-of-state retailers to collect and remit sales/use taxes that are owed, but not currently being remitted by either the remote retailer or purchaser.
Let me further explain. If you make a purchase of tangible personal property at any local retailer, the seller is required to collect and remit the 6% sales tax to the Idaho Tax Commission. I am sure you are familiar with this process. If that same retailer takes your order over the phone, by mail or over the internet, that retailer will also be required to collect and remit the sales tax. This retailer has a nexus in Idaho, meaning it has a physical presence in Idaho.
If you are shopping using the phone, direct mail catalogues or on your computer, it is likely you may find the same or similar product and make the purchase from a retailer with no nexus to Idaho. That seller is not legally required to collect the tax. However, the Idaho purchaser is required to remit the tax to the Idaho State Tax Commission. Maybe the tax is 90¢ or $90, it does not matter. Under Idaho Sales/Use tax code you owe the tax. The state recognizes the complexity for the taxpayer to actually remit the tax on each sale. The taxpayer with a sales/use tax liability can remit any taxes due with their Idaho State Income Tax Return. You can find on your Idaho Tax Return Form 40, line 28 the requirement to remit any sales/use tax from remote purchases.
The Streamlined Sales Tax Simplification Act modifies Idaho code to bring our definitions and procedures into an alignment with a uniform agreement between 24 other states and the Streamlined Sales Tax Governing Board. There are no changes in what we tax, how much we tax or what we exempt from taxation. The agreement gives all retailers a consistent sales tax policy to simplify their sales to the various states. It provides for a uniform electronic sales tax remittance and filing policy, as well as a central registry to allow one registration to meet the needs of all the member states.
Because of federal limitations established by a Supreme Court ruling, remote sellers are not required to collect sales taxes, unless they have a physical presence in the purchaser’s state. Membership in the 24 state Governing Board will accommodate those sellers who wish to streamline their internal policies, collect the taxes on their sales and remit to the respective states. It is estimated that Idaho could collect between $1 and $3 million per year by voluntary compliance. There is currently, an estimated, $30 – $50 million per year not collected by the state of Idaho.
Most people want taxes to be fair, and quite often the collection of these remote sales taxes are considered a matter of “Fairness.” Whenever I have mentioned fair taxes, I am reminded by a good Idaho Senator that “The Fair comes once per year, and in most counties it is in late summer.”