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SALT LAKE CITY — New retail numbers show more people are clicking the keyboards for deals than braving the crowds at brick and mortar stores, and that has a taxpayer watchdog group wanting Utah to get a piece of that revenue pie.
Cyber Monday is re-igniting the debate to cash in on those online deals by pushing for sales tax.
"Online retailers have a competitive advantage, out of state online retailers," said Billy Hesterman, vice president, Utah Taxpayers Association. "They don't have to issue a tax and the price is usually cheaper than if I buy it from my local store in the Salt Lake Valley."
In June 2015, Utah Rep. Jason Chaffetz, along with a group of bipartisan lawmakers, introduced H.R. 2775, the Remote Transactions Parity Act (RTPA). On his website, Chaffetz says the bill will modernize "our nation's outdated sales tax collection process. The legislation, which will be referred to the House Judiciary Committee because of its interstate commerce nexus, would promote states' rights and bring sales tax parity to e-retailers and brick-and-mortar stores."
Hesterman said he supports online sales tax as long as the collection leads to broader tax base and a lower sales tax rate. He also warned that any implementation of taxes from online sales should be revenue neutral, not just a windfall for lawmakers.
"They should lower the overall sales tax rate that they are charging so that it doesn't become additional money that the state is collecting," he said. "But actually level the playing field between the online retailers and local stores to make sure everyone is paying their fair share."
Hesterman also said that taxpayers are supposed to record their online purchases with their annual tax returns and pay their sales tax on those items but "hardly any do" and as a result, he said Utah is losing well over $100 million every year in online sales tax revenue.
Some online retail executives have mixed emotions over the online tax debate, keenly aware of how it would impact their business. The Overstock.com warehouse in Salt Lake City is bustling with employees pulling millions of products, stuffing them into boxes, and sliding those packages down the conveyor belt. In 2014, the online retailer reported shipping 1.4 million packages out of two warehouses.
"There's such a mish-mash in policies and interpretations from different states," said Patrick Byrne, CEO of Overstock.com. "I'd actually be okay for one nice clear solution."
Byrne said Overstock.com pays taxes for its operations in Utah, Pennsylvania and Kentucky but also said online retailers are different across states.
"We require far less services of the state of Alabama to, for example, ship products there than we would if we had a store in Alabama," said Byrne. "So I don't think it's right that we should have to pay the same taxes."
Byrne believes taxes should be lower for online sales to reflect "the fact that we burden different states far less with our online sales than, say, big box retailers who have big stores there."
Ultimately Byrne said the federal government should determine a fair online sales tax system to implement. "I could live with a fair unified system," he said.
Taxpayer watchdogs say lawmakers have to be careful not to burden small online businesses that could potentially experience problems if online sales tax becomes a reality.
"We have to be sensitive to smaller businesses like someone who just prints T-shirts and they sell less than $3,000 a year," said Hesterman. "Maybe there's some type of exemption that should be included for them. We'd be open to that."
Congress and Utah lawmakers haven't been able to convince enough people to get on board with the online sales tax plan; however, that does not mean they won't keep trying.
