POCATELLO --When was the last time you purchased something over the Internet? Now, when was the last time you paid Idaho's 6 percent sales tax on that purchase?
If you feel like you just ran a stop sign, you're not alone.
Citizens in Idaho and most states are required to pay sales taxes on Internet purchases, but like the speed limit, that law is seldom followed.
Idaho is in the same boat as other states on this issue as it struggles to figure out how to collect taxes due on Internet purchases. Most people familiar with the issue estimate that Idaho is losing about $35 million a year in tax revenue because of this flaw in the system.
There's no simple solution , as evidenced by the bickering going on in the Idaho Legislature over an Internet sales tax bill that Speaker of the House Lawerence Denney, RMidvale , plucked out of the Revenue and Taxation Committee and sent to die in the Ways and Means Committee.
Supporters of this socalled "Main Street Fairness Act" legislation say it would at least allow the state to begin to seek a solution to the issue, while Denney says the legislation could end up hurting Idaho's economy by scaring away businesses.
Everyone agrees the ultimate solution lies with Congress. During the infancy of the Internet, the U.S. Supreme Court ruled that states cannot force retail businesses to collect sales taxes unless they have a physical presence in the state the order was shipped from.
So, while people can voluntarily pay the taxes now, Congress would have to act before states can collect the full amount of sales taxes due them. At least 24 states have joined together in an effort to find a way to collect Internet sales taxes and convince Congress to act.
The Main Street Fairness bill introduced in the Idaho Legislature would allow Idaho to participate in this national "Streamlined Sales Tax Project."
Denney said the bill would merely allow the Idaho Tax Commission to send a representative to the group's meetings. To become a member, Idaho would have to bring its tax code into compliance with the agreement, he said.
"In my opinion, the bill doesn't do anything," he told the Journal Wednesday.
Because 26 states are not part of the project, Denney added, that could drive businesses away from Idaho and to those states that are not collecting the tax or don't have sales taxes, such as Montana and Oregon.
"If you are an online business, where would you locate?" he said. "You certainly wouldn't locate in a state where you have to pay more taxes."
In an example of what's at stake and how Denney's envisioned worst-case scenario might work, the state of Texas recently decided that an Amazon.com distribution center in that state constituted a physical presence and sent the company a $269 million bill for uncollected sales taxes. Amazon responded by announcing it was closing the distribution center and moving its operations out of Texas.
House Minority Leader John Rusche, D-Lewiston , said the current system isn't fair to local businesses and he believes joining the SSTP is the only way for Idaho to be part of the solution and not the problem.
"We have to figure out what we want to do as a state because the system is not fair to local main street businesses," he said.
Rusche tired to use a procedural move to get the bill out of the Ways and Means Committee but that effort failed by a mostly party line vote of 54-15. He said bill supporters may use other maneuvers to try to resurrect it but admitted they aren't likely to work because the House speaker has a lot of power in deciding where bills go and when they're heard.
But Rusche said something needs to happen because small businesses in Idaho are being killed by larger competitors that benefit substantially because of the current system. He said a bookstore in downtown Lewiston that closed because it couldn't compete with Amazon's 6 percent discount in Idaho is one of countless such examples in the state.
"It's a big problem and we're going to have to figure out a way out of it," he said. "The Main Street Fairness bill at least allows us to come up to the table and become part of the group that works on a solution."
"All the little businesses are getting killed because they can't compete," said Rep. Roy Lacey, D-Pocatello , former owner of Roy's Western Wear in Pocatello.
Lacey said it wasn't uncommon for people to window shop in his store and then order the item over the Internet. "Six percent may not sound like a lot, but when you're talking about a $2,500 saddle, that's a lot of money," he said.
"We're hurting our Idaho people and benefiting those businesses outside of Idaho," Lacey added. "We need to get in line with this (Streamlined Sales Tax Project). That's all this bill does: it gets us in line."
Sen. Diane Bilyeu, DPocatello , has introduced a bill that seeks to help the state collect some of the $35 million it is missing out on each year.
When Idahoans fill out their state tax returns, they are asked how much they owe in sales tax because of Internet purchases. However, virtually every one leaves that space blank, the Idaho Tax Commission assumes the amount is "zero," and the money goes unreported and uncollected.
Bilyeu's bill would require people to fill out the space in order for their tax form to be accepted by the tax commission.
"Who knows when the feds are going to do something on this issue," Bilyeu said. "At least this is an attempt to capture some of that Internet sales tax that is owed to the state."
Bilyeu is currently rewriting her bill to address some of her fellow lawmakers' concerns, including fears that too many returned tax forms would overwhelm the tax commission.
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