Should Internet sales be taxed?

John Nygren sees it as “a mat­ter of fair­ness.” Why, asks the Repub­li­can state law­maker from Marinette, must brick-and-mortar retail­ers col­lect sales taxes from cus­tomers while some of their Inter­net com­peti­tors do not?

Nygren sup­ports the fed­eral Mar­ket­place Fair­ness Act, which would let states snare sales and use taxes on their res­i­dents’ online pur­chases from other states. Now they get these taxes only from busi­nesses with a phys­i­cal pres­ence in their state.

The bill passed the U.S. Sen­ate 69–27 in May. Wis­con­sin Sen. Tammy Bald­win, a Demo­c­rat, voted yes; Ron John­son, a Repub­li­can who says the bill “placed too much bur­den on online retail­ers,” voted no. It’s now before the House, where it faces a tougher fight.

Repub­li­can Gov. Scott Walker has no posi­tion on the bill, says spokesman Tom Even­son, but the state’s bien­nial bud­get com­mits it to use any addi­tional rev­enue from Inter­net sales taxes to reduce the income tax. Con­ser­v­a­tive econ­o­mist Art Laf­fer esti­mates this would bring Wis­con­sin 23,000 new jobs and a $7.6 bil­lion boost to its econ­omy by 2022.

The state Depart­ment of Rev­enue esti­mates the state would col­lect an addi­tional $92 mil­lion in fis­cal 2015. The non­profit Wis­con­sin Tax­pay­ers Alliance thinks the actual amount would be closer to $70 mil­lion, research direc­tor Dale Knapp says.

State res­i­dents are now sup­posed to pay these uncol­lected sales taxes with their income tax. But few do: Knapp says only 3 per­cent of the state’s 2011 tax fil­ings included these pay­ments, “cer­tainly a much lower num­ber than if every­body fol­lowed the law.”

The bill is backed by the Alliance of Wis­con­sin Retail­ers, Wis­con­sin Rental Mer­chants Asso­ci­a­tion and Wis­con­sin Inde­pen­dent Busi­nesses. (Also on board: Amazon.com, whose ware­house expan­sion plans in many states means it must col­lect these taxes anyway.)

But oppo­nents fore­see a huge new bur­den on state busi­nesses with online sales.

In a recent let­ter to the Mil­wau­kee Jour­nal Sen­tinel, con­ser­v­a­tive activist Orville Seymer said the bill would force small online retail­ers, “in many cases family-run or mom-and-pop oper­a­tions,” to route sales tax pay­ments to the more than 9,600 state and local juris­dic­tions that impose them.

This infor­ma­tion, Seymer says, came from George Klaetsch, a Madison-based con­tract lob­by­ist rep­re­sent­ing We R Here, a national group for small online retail­ers. Seymer later learned the bill exempts com­pa­nies with less than $1 mil­lion a year in out-of-state sales and directs pay­ments to “a sin­gle entity” within each state, not a frac­tured array of tax­ing jurisdictions.

Seymer still opposes the mea­sure, call­ing it “more bureau­cracy that we don’t need.” Klaetsch did not return calls.

The state’s con­gres­sional del­e­ga­tion is all over the map on the Mar­ket­place Fair­ness Act.

Demo­c­ra­tic Rep. Mark Pocan, a bill cospon­sor, says it would “remove the unfair advan­tage out-of-state online com­pa­nies cur­rently have over Wis­con­sin busi­ness own­ers.” Demo­c­rat Rep. Gwen Moore is also in favor.

Repub­li­can Rep. James Sensen­bren­ner is firmly opposed, say­ing in a state­ment: “Impos­ing new taxes on Inter­net sales would sti­fle growth in what con­tin­ues to be an evolv­ing busi­ness plat­form and would amount to a tax increase on Amer­i­can consumers.”

Rep. Reid Rib­ble, also a Repub­li­can, has “con­cerns about sub­ject­ing Wis­con­sin small busi­nesses to Cal­i­for­nia, New York or any other out-of-state jurisdiction’s sales tax poli­cies (which they) have no say in.” He sug­gests bas­ing the tax on where a busi­ness is located, not where its cus­tomers are.

Repub­li­can Reps. Tom Petri and Paul Ryan are ambiva­lent about the cur­rent bill, as is Demo­c­ra­tic Rep. Ron Kind, who says “the $1 mil­lion thresh­old is too low for some of Wisconsin’s small busi­nesses.” GOP Rep. Sean Duffy’s office fielded inquiries but did not say where he stands on the bill.

Nygren takes such diver­gent reac­tions in stride: “That’s the way our process works. We’re not all going to be march­ing in step.” But he hopes the del­e­ga­tion will agree to give Wis­con­sin busi­nesses “the oppor­tu­nity to be on an even play­ing field.”

 

Bill Lued­ers is the Money and Pol­i­tics Project direc­tor at the Wis­con­sin Cen­ter for Inves­tiga­tive Jour­nal­ism (www.WisconsinWatch.org). The project, a part­ner­ship of the Cen­ter and Map­Light, is sup­ported by The Joyce Foundation.

The Cen­ter col­lab­o­rates with Wis­con­sin Pub­lic Radio, Wis­con­sin Pub­lic Tele­vi­sion, other news media and the UW-Madison School of Jour­nal­ism and Mass Com­mu­ni­ca­tion. All works cre­ated, pub­lished, posted or dis­sem­i­nated by the Cen­ter do not nec­es­sar­ily reflect the views or opin­ions of UW-Madison or any of its affiliates.

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