Online sales tax bill advances in Utah Legislature

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SALT LAKE CITY — A bill aimed at extending sales tax collections on online purchases to more businesses was approved unanimously Tuesday by the Senate Revenue and Taxation Committee.

The sponsor of SB110, Sen. Curt Bramble, R-Provo, said the bill would require companies with at least $100,000 in online sales in the state to charge sales tax on purchases, even if they have no other tie to Utah.

Because existing court rulings don't require companies without a physical presence in a state to collect sales taxes, the bill is expected to be challenged. Bramble said he believes Utah and other states with similar legislation will win a court battle.

He said companies are already voluntarily collecting sales taxes from Utah customers. That includes Amazon.com, which began charging sales taxes on purchases made in Utah at the beginning of the year.

Utahns are supposed to be paying sales taxes that aren't collected by online retailers on their state income tax returns. But legislative fiscal analysts estimate more than $220 million will go unpaid in the current budget year.

Supporters of the bill said the state needs to take action to protect locally owned businesses that see customers come into their stores to shop but then choose to save money by buying online from retailers that don't charge sales tax.

Opponents, however, questioned whether it was worth the state getting in a legal fight when other states are already challenging past court rulings protecting some online businesses.

The bill also requires sales taxes to be paid by affiliate marketers, a provision seen as impacting bloggers who rely on earning a share of sales made through their online sites.

The committee's vote advances the bill to the full Senate.

Earlier Tuesday, Senate President Wayne Niederhauser, R-Sandy, said he supports the bill and expects it to pass the Senate. He also said there are discussions underway that could lead to raising more money for schools.

Niederhauser told reporters a draft of what educational outcomes should be tied to a tax increase for schools may be ready by the end of next week. The issue was raised as a result of a proposed citizens initiative.

That initiative, known as Our Schools Now, would boost the state's 5 percent income tax rates by seven-eighths of a percent to bring in an additional $750 million for public education.

The Senate president said he would rather reduce income tax exemptions and deductions than raise the rate, lowered to encourage economic development. But he said lawmakers have to first agree on what the extra money should do.

"That's what I'd hope would be the beginning of the discussion. Once we get that settled, then we'll talk about how we get that funded. But at the end of the day … it's politically very, very, very difficult," he said.

Austin Cox, campaign manager for Our Schools Now, said the organization was "pleased to learn the Legislature is considering a significant investment in Utah's future."

But Cox said Our Schools Now, which includes business and education leaders, "continues to work toward qualifying for the ballot in 2018. We are glad the Legislature is also working on a solution."

Niederhauser and other legislative leaders, including House Speaker Greg Hughes, R-Draper, met with representatives of Our Schools Now before the start of the 2017 Legislature to talk about education funding.