Politics & Government

You soon might be paying sales tax on your online purchases

A shopper in Miami searches an online retail site. The Legislature is considering a state tax on online shopping.
A shopper in Miami searches an online retail site. The Legislature is considering a state tax on online shopping. The Associated Press

You soon might have to pay a 6.5 percent sales tax on your online shopping to help balance the state’s budget.

An online sales tax plan from House Democrats would bring in an estimated $340.8 million for public schools, higher education financial aid and other education-related expenditures over the next two years.

The tax also could help brick-and-mortar businesses compete with online sellers, said Rep. Kris Lytton, D-Anacortes, a key House budget negotiator.

“We have a lot of businesses in Washington state that are on an uneven playing field where their products are taxed, but that same product might not be taxed if you bought it on the internet,” Lytton said.

The Democratic proposal has not drawn outspoken resistance from Republican budget negotiators.

“If we need additional revenue, this is one of the taxes we ought to explore,” said Rep. Terry Nealey, R-Dayton, the GOP’s ranking minority member on the House Finance Committee.

Right now, Washington retailers must collect sales taxes on online purchases only if they are selling their own products to state residents.

When online retailers, such as Amazon, eBay or Overstock, sell products from out of state, they are not required to collect sales tax.

However, because Amazon has a physical presence in Washington, it must collect tax when selling its own products to people in the state, such as its e-reader Kindle.

The new proposal would require online retailers from any state to either collect state sales tax or provide buyers with information on how to pay the tax to Washington.

It would apply only to companies grossing more than $10,000 in sales in Washington.

Online retailers that opt to give buyers information on paying the tax would have to file an annual report with the state Department of Revenue to ensure the right amount of sales tax is collected.

The report would include buyers’ names, what they bought, how much they spent, and the billing, mailing and shipping addresses they provided to the retailer.

Sellers also would have to preserve the information for five years, in case the the state needs to verify a report.

Lytton said businesses would be more likely to collect sales tax themselves because the second option is “more burdensome.”

The proposed online sales tax is part of a $3 billion revenue package House Democrats have offered to comply with a court order to fix how the state pays for public schools.

Nealey said he doesn’t support most of the Democratic budget proposal, but said a “reasonable” tax on online retailers could reduce an “unfair advantage” of those who don’t have to pay sales taxes.

There is no federal regulation on online sales taxes, but Nealey said it is needed to avoid a host of varying laws in different states. In the absence of one, he said, Washington should consider bringing its tax code up to speed with new online markets.

Colorado has passed a sales tax to regulate online retailers, and at least two other states — Arkansas and Nebraska — have considered one.

Nealey said the proposal still needs to nail down how the tax would be implemented and enforced.

Sen. Dino Rossi, R-Sammamish, said he was skeptical of the tax because there is little history of it.

He said he wanted to see how it works in Colorado before committing Washington to it.

Rossi, a GOP budget writer in the Republican-led Senate, said he didn’t want to support or oppose the online sales tax proposal before Democrats approve their tax package in the House.

“Nobody knows exactly how it would work and the magnitude and the reliability of that prediction,” he said.

Forrest Holt:

@forrest_holt

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