BOISE — A bill that would require some out-of-state retailers to collect and remit a sales tax on online purchases passed in the House 46-21 Friday after nearly an hour of debate over the constitutionality of the measure.
HB 578, brought by Rep. Lance Clow of Twin Falls, would ensure that Idaho residents pay sales taxes on online purchases by putting the responsibility of collecting the sales tax on the retailer rather than the buyer. As it stands now, it’s up to the customer making the purchase to report and pay that those taxes on an income tax return — something that not every person actually does.
The result, supporters of HB 578 say, is that out-of-state retailers gain an unfair advantage over in-state businesses.
“Just as a fundamental question of fairness, I don’t think it’s right for us to be treating businesses in Idaho worse than we’re treating companies that are outside of Idaho,” said Rep. Ilana Rubel, a Democrat from Boise. “I think to level the playing field, we need to pass this.”
The bill’s co-sponsor, Rep. Mike Moyle, framed the legislation as “a way to help honest people stay honest.”
“If you get audited and they figure out that you’re not paying your sales tax, you can have some bigger troubles,” said Moyle, a Republican from Star. “Quite frankly, I don’t think most people even know that they owe the use tax.”
Although Clow has been pushing similar legislation in Idaho for years, the question of how states should collect sales taxes on online purchases has picked up momentum in recent years, with states including Pennsylvania and Colorado passing similar laws.
The U.S. Supreme Court announced last month that it would hear the case of South Dakota v. Wayfair, which will challenge a 1992 ruling that states could not force mail-order catalog retailers to collect sales taxes unless the retailer had a physical presence in that state.
During the House debate, several opponents of the HB 578 questioned whether Idaho would have to rethink the legislation if the Supreme Court rules against South Dakota.
Clow said he believed his bill would stand regardless of the Supreme Court ruling because of HB 578’s stipulation that retailers must have some affiliation to an Idaho-based seller — along with grossing at least $10,000 in Idaho sales annually — to qualify. The South Dakota law includes businesses that gross a certain amount in South Dakota sales but do not necessarily have any physical presence in South Dakota or affiliations to businesses there.
HB 578 more closely resembles a similar law in New York that was upheld by a lower court, Clow said.
Moyle, who opposed previous versions of the bill, referenced court rulings in New York and Colorado in his argument on the floor.
“I’m the guy that’s helped stall this bill for years,” Moyle said. “But things have changed.”