Online sales tax might help state, but it’s not a simple matter

Staff writerJune 14, 2013 

Online shopping soon might become more lucrative for state government.

Even if Congress doesn’t open the Internet to state sales taxes, a more modest change is brewing in Olympia — but drawing some of the same opponents.

For months, the Senate has been looking into how to grab more sales tax from out-of-state sellers, but it took a House budget offer for details to emerge.

The House plan calls for raising $39 million by forcing online brokers such as eBay to collect taxes as part of connecting a buyer and seller.

It’s a tax increase, says a group representing eBay, and other e-commerce companies, which wrote a letter to lawmakers Wednesday.

“Right now, there’s no way that eBay would be due for the tax on merchants that happen to sell to Washington residents,” said Steve DelBianco, executive director of NetChoice, in an interview.

He said if the change is approved: “This isn’t really money that comes from out-of-state retailers … It’s paid by the consumers in Washington.”

No one is publicly defending the new proposal, which could figure into budget negotiations as lawmakers try in a special session to put together a more than $33 billion budget that complies with a court ruling that found state government has shorted Washington public schools.

The Senate’s first budget plan counted on a similar sum of extra revenue, but it provided no explanation of how to collect it. It’s simple, Senate budget writer Andy Hill said at the time: Some out-of-state companies should be collecting sales tax and aren’t.

The Redmond Republican hasn’t publicly endorsed this latest proposal, and he declined comment through a spokesman, saying it’s part of ongoing budget talks.

House Democrats added the online sales tax proposal only as a way to move toward the Senate, said House Finance Chairman Reuven Carlyle. The Seattle Democrat still sees it as unreasonable to assume the extra revenue can be achieved.

“I personally think it’s a train wreck of a policy,” Carlyle said.

But while Carlyle didn’t make a case for the latest proposal, he did say there is “a legitimate public interest in getting fairness” between online and brick-and-mortar retailers.

Retailers including Walmart and many mom-and-pop shops have pushed for changes at the federal level, saying they are undercut by online merchants. The courts have ruled that states can’t force out-of-state sellers to collect sales tax. Instead, buyers are supposed to hand over the money to government in the form of a use tax — which few do.

But what happens when someone goes to the website of a company with a physical presence in Washington — say, eBay, Amazon or Google — to buy from a third party who lives out of state?

The Department of Revenue encourages such facilitators to collect tax, with mixed success.

“It’s more on a voluntary basis than us clearly being able to order them to do it,” spokesman Mike Gowrylow said.

The budget proposal aims to make it mandatory. But Gowrylow said that would require a change in the law, not just budget language. The e-commerce group, meanwhile, complains lawmakers are trying to sneak it through in a budget.

DelBianco warns that sellers would move their business to companies with no presence in Washington, and that eventually would push some companies out of state. When a different proposal targeting online sales was passed in Illinois, the company FatWallet moved to Wisconsin.

Jordan Schrader: 360-786-1826

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