Idaho Considers Internet Sales Tax

Internet purchases may soon cost a little more — the state legislature is considering adopting a way to collect sales tax from online purchases.

The House Taxation Committee introduced a new bill Tuesday that would help the state collect tax from online sales by allowing the state to join the Streamlined Sales Tax Governing Board — 24 states that have joined together to collect sales tax from Internet and mail order sellers.

When you buy products on websites like Amazon.com, you don’t have to pay sales tax because the seller, in this case Amazon, isn’t based in the same state.

But just because sales tax is not collected online doesn’t mean you don’t have to pay it.

Line 28 on Idaho’s state income tax form asks for “sales/use tax due on Internet, mail order and other non-taxed purchases.”

“That’s probably not happening very much,? House Revenue and Taxation Committee chairman Dennis Lake said. “Through negligence, people are evading paying the taxes.”

A group of states are attempting to change that and Idaho is looking to join them.

The Streamlined Sales Tax Governing Board has configured an algorithm to determine how much tax to collect from buyers in each state.

“For an Internet company it would be a pain to put it into place, but it’s do-able,” said software designer Joseph West.

West has designed software out of Rexburg for small online businesses. He said he believes this is win-win solution.

?You’re taking a very difficult situation and trying to apply some logic and some rationale to it that’s fair to both the states, the vendors and the hosting companies,? West said. ?I think Idaho ought to participate in that discussion. This way they can influence the discussion.”

Technically the purchaser is responsible to pay sales tax but the the burden has been placed on the seller to collect the tax

“Sales tax is an obligation for the purchaser but we have just forced the seller to collect it but regardless you still have the obligation,” West said.

In the past, not all legislators have agreed on joining the group.

“The solution is so complex and somebody has come up with a reasonable, logical approach, and they can’t get people to buy into it,? West said. ?I think some of the state legislators in Idaho don’t want to have to conform to what they believe this agency would determine, even though if we were to join this group we could participate in that definition.”

Chairman of the Idaho Revenue and Taxation Committee Dennis Lake said Idaho loses an estimated $35 million a year.

“That’s $35 million that has to be made up by somebody else,? Lake said.

About 1,700 organizations voluntarily collect the sales tax but it won’t be a legal requirement until Congress acts.

Congress is currently debating three bills on the the matter.

If you want to join in on the conversation, the House Tax Committee is holding a public hearing Wednesday, Feb. 29 at 8am in the committee room in Boise.

If passed, the bill wouldn’t go into effect until July 2013

?We have a full year now to work through it and make sure all the T’s are crossed and all the I’s are dotted and we are ready to go when the federal government acts,? Lake said.