Revenue Committee Supports Internet Sales Tax Grab

[This article was first published by Maureen Bader on May 17, 2016]

In Wyoming, some politicians are looking high and low for ways to take your money, especially if they can make it look like someone else is slipping his hand into your pocket. One way that popped up during a recent Revenue Committee meeting is a tax on Internet retail sales. 

Proponents justify this tax grab in two ways. First, the need for more tax revenue to fund the state budget shortfall and second, the notion that hard-pressed Main Street businesses can’t escape collecting the tax so taxing Internet sales would level the playing field. However, government has a spending problem, not a revenue problem.  An Internet sales tax won’t do much for the revenue shortfall and if government really cared about Main Street retailers, they would reduce their tax burden instead of extending the dead hand of government to the Internet.

Every state has a different, and sometimes complex, sales tax regime so in 1992 the Supreme Court ruled in Quill Corporation v. North Dakota that Internet and catalog retailers shouldn’t have to collect state sales taxes unless they had a physical presence in the buyer’s state.

But politicians just don’t like to see capitalist acts between consenting individuals go unpunished, so Senator Richard Durbin (D-Ill) sponsored the Main Street Fairness Act in August 2011. This went nowhere, so in November 2011, Wyoming’s own Senator Enzi introduced The Marketplace Fairness Act, to allow states to collect sales taxes from out-of-state retailers. This also went nowhere. The latest attempt to force Internet retailers to act as tax collectors was Senator Enzi’s Marketplace Fairness Act of 2015, which never made its way out of the senate. Although attempts to tax the Internet appear to be dead, it seems some Wyoming politicians hope the effort is merely on life support.

During the Revenue Committee meeting, Senator Ray Peterson asked director of the Revenue Department Dan Nobel how much the state was missing in Internet retail sales tax revenue.

According to Director Nobel, the state is missing between $23 million to $46 million per year in lost revenue. But according to a recent Consensus Revenue Estimating Group report, the state may have an additional shortfall of $130 million for fiscal year 2016 alone – and that fiscal year ends at the end of this June! Sorry Senator Patterson, the amount won’t fill state coffers.

Undeterred, Senator Patterson what more could Wyoming do to get an Internet retail sales tax passed.

Director Nobel said the state could work with congress to get it passed or also generate support for legislation.  

But no matter who takes the blame for a higher tax burden on families, higher taxes won’t fix Wyoming’s budget shortfall because state legislators have a spending problem, not a revenue problem.

But the tax grab is only one justification. The other involves a backwards attempt to help Main Street businesses by raising costs to Internet retailers.

However, forcing Internet retailers to be state tax collectors, like retailers on Main Street, just means even more businesses are hit with higher costs. Besides, many Main Street retailers use the Internet to increase their sales. So instead of dragging innovative retailers down into the high tax and regulatory regime now hurting Main Street, why not free Main Street from onerous taxes and regulations so they too have the resources to innovate and create jobs? 

The Wyoming state government has a spending problem, not a revenue problem, and burdening Internet and some Main Street retailers with more paperwork is unlikely to do much about Wyoming’s budget shortfall.  What it will do is burden innovative sellers with additional costs. Instead of expanding the dead hand of government into Internet retail sales, make the system less costly and burdensome for Main Street, and leave money in the pockets of the people who can spend it the wisest – the people who earned it.