December 21, 2014

Congress grapples with online sales tax

There’s a renewed push in Congress to require retailers to collect sales taxes for online purchases, and it could mean some changes are in store for Wisconsin consumers who rely heavily on the internet to do their shopping.

Many major retailers are already collecting state and local sales taxes, but it’s largely those that are already physically doing business in a state. On sites like Amazon.com and many smaller retailers though, sales taxes for Wisconsin are not collected. Instead, the burden is currently on consumers to report those purchases on their yearly income tax, which then translates into a use tax assessed by the state.

Proposals in Congress would change that by requiring all businesses to collect those taxes and pass them along to the proper authorities. Dale Knapp with the Wisconsin Taxpayers Alliance says it would bring in additional revenue for the Badger State, although the actual dollar amount is hard to gauge. Knapp says it could be anywhere from between $50 million to $150 million a year.

Many major retailers support the move, although small businesses have voiced opposition. Knapp says that’s largely because tracking, collecting, and paying those taxes could increase their cost of doing business. There’s also the challenge of different tax rates levied by states, counties, and even local municipalities. He says that presents a major financial challenge for smaller retailers, even if technology does exist to help them track the information.

The state does require consumers to pay use taxes for online purchases, but Knapp says there’s no way to tell if people are following through. Most sales data is not made available for the state to track and he says most consumers who do report the information are likely only giving a “rough estimate” of what they are purchasing online.

The issue received a hearing on Capitol Hill this week, although the future of any legislation remains uncertain.

AUDIO: Andrew Beckett reports (1:09)