FEATURE STORY: www.PayUpWyo.com

By on February 17, 2015

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Would an Internet tax kill the economy or help local merchants survive.

We all do it.

“Add to cart.” Click. “Proceed to checkout.” Click. “Place your order.” Click.

And we’re all breaking the law. Well, maybe not all of us. But ask yourself this: Did you mail in that Zappos receipt to the Wyoming Department of Revenue along with a check for the appropriate sales tax? No?

Don’t worry; hardly anybody does, says U.S. Senator Mike Enzi. “Maybe three a year,” the Wyoming senator once joked. Enzi’s plan to remove the burden of self-reporting online purchases and shift it to major retailers simply helps enforce existing sales and use tax laws, and could level the playing field for brick-and-mortar merchants struggling to compete with the mighty Amazons of the cyber world. And for that, he has caught a lot of flak.

The Marketplace Fairness Act has been Enzi’s passion since joining the Senate in 1997. Twice he introduced a bill that would remove the shield online retailers enjoy, requiring those doing more than $1 million a year in sales to collect sales tax at point of purchase. Twice the bill went nowhere.

Most consumers hate it. A recent Gallup Poll shows about 60 percent of Americans don’t want to pay sales tax on their Internet purchases. With the 18- to 29-year-old crowd, it’s more like 73 percent. But a majority of respondents admit having to pay sales tax online would cause them to order less from Web sites and shop more on Main Street.

Perhaps surprisingly, Internet heavyweights like Amazon have lobbied hard for the bill, along with big box chains like Wal-Mart, Best Buy and Home Depot, which have joined the Alliance for Main Street Fairness in support of the Marketplace Fairness Act. Many insiders think Amazon will swallow up their competition if the Senate bill passes, and most large volume retailers have an existing Web presence and sophisticated accounting software already in place.

Lawmakers remain divided. Enzi stuck his neck out with the bill. Few online shoppers are prepared to tax themselves and fewer politicians representing these constituents care to have their names attached to it. Still, the bill made it out of the Senate last year on a 69-27 vote but has languished in the House. Speaker John Boehner effectively killed the bill again last November when he refused to introduce it to the floor.

Backers of the bill haven’t given up, though, believing it can be folded into another piece of legislation during the three-week lame duck session of the 114th Congress. Enzi did not disclose what plans he and co-sponsor Dick Durbin have for the bill’s future, but merely reiterated his commitment to getting it passed.

The tax you don’t pay

In our heart of hearts, most of us know it’s not fair to brick-and-mortar shops to have to go up against goliath E-commerce merchants who boast virtually unlimited inventory and enjoy little overhead. Add free shipping and a 5 to 10 percent discount after zeroing out sales tax, and even stalwarts who swear by day they want to support their local economy are spending their nights blowing up PayPal accounts and feverishly refreshing UPS tracking Web sites.

Most consumers also incorrectly view the bill as an imposition of a new tax. It is not. It would address a loophole in a 1992 Supreme Court decision (Quill vs. North Dakota) that allowed sellers to put the onus on shoppers to pay sales tax on items they purchase from out-of-state vendors. In Wyoming, it means a buyer who purchases a product from a seller physically located outside of the state – whether it’s a pair of UGGs from Overstock.com or a power drill from the Sear’s catalogue – is required to fill out a form and send in what is referred to as a “use tax” to the DOR.

“Few people are volunteering to do that,” admitted Wyoming Department of Revenue administrator Kim Lovett. “We are part of 24 states that have introduced a streamlined sales project that we hope proves there is a way to collect sales tax in a simple and uncomplicated way. Still, we receive very few self-reported sales or use tax from online buyers. Hardly any, really.”

Don’t panic. The DOR does not have the ability to track you or anyone else down for his or her delinquent use tax payments. “The only way we would find out is if we audit the vendor,” Lovett said.

Jeff Golightly, president of the Jackson Hole Chamber of Commerce, says it’s expecting a lot for consumers to understand the law and follow through.

“I’ve heard of one person in my life who does this – someone who, every time they buy something online they save receipts and they mail their taxes in,” Golightly said. “But I think 90 percent of people who read this story are going to have no idea they were even supposed to. And of the 10 percent who know they are supposed to claim all online purchases and pay taxes on them, I would be surprised if one in a hundred do; one in a thousand. That’s one of the reasons I support Enzi for doing this.”

Lovett acknowledged most Wyomingites are unaware they are required to pay a use tax on Internet purchases and, realistically, all goods purchased out-of-state that are intended for consumption or use in Wyoming. For instance, let’s say you drive down to Denver one Saturday and pick up a brand new 54-inch flat screen TV. You got a better deal because the Best Buy off I-25 at W. 104 Street moves product in such bulk. You also pay a 3.65 percent sales tax. Beats the 6 percent tax in Jackson, you think to yourself.

Well, if you plan on setting up that $3,000 TV in your living room on N. Cache, you are required to pay a use tax for the difference between the sales tax where your purchase took place and the sales tax where you plan to use your stuff. In this case, you should mail in a $70.50 check, along with the appropriate form, to the Wyoming Department of Revenue.

Buy that same TV in Salt Lake City, where the sales tax is 6.85 percent, and you might expect a refund from the DOR for $25.50, right? Don’t count on it. It doesn’t work in reverse. “We are not going to give them money back,” Lovett said.

JH Chamber president Jeff Golightly says the Chamber is 100 percent behind Enzi’s Marketplace Fairness Act. (Photo credit: Jake Nichols)

JH Chamber president Jeff Golightly says the Chamber is 100 percent behind Enzi’s Marketplace Fairness Act. (Photo: Jake Nichols)

Broadway versus broadband

Golightly believes a system set up to fail could be tweaked slightly to give local businesses a fighting chance.

“It’s tough for them and that’s why I think we need the rule,” Golightly said. “They have a 6 percent price increase right off the bat. They’re up against big, multi-national corporations who can buy in such extraordinary bulk. They don’t have [the luxury of] a store frontage that’s renting for $40 a square foot. They’ve got a lot of challenges so we need to do what we can to level the playing field.”

Enzi’s press secretary Max Donofrio agrees the Marketplace Fairness Act would help simplify a law that is broken daily.

“Consumers already owe sales and use taxes on the goods they purchase if they reside in a state that has a sales tax, whether those purchases are made over the phone, by mail, or via the Internet,” Donofrio said. “For example, there is a provision in Wyoming law that provides that if someone buys something from out of state and doesn’t pay sales tax on it, they have to fill out a form and self-report sales and use tax to the state government. Unfortunately, most consumers are unaware they are required to pay this tax when the retailer does not collect it at the time of purchase. The Marketplace Fairness Act provides states the authority to reduce the burden of self-reporting from consumers.”

Enzi’s challenge has been to educate his peers and constituents on exactly what it is he is proposing. For starters, many buyers and sellers alike are under the mistaken impression the lawmaker is trying to levy a new federal tax that some say will curb commerce.

John Conway, CEO of the Astonish Media Group, is an author and attorney with more than 15 years experience in the media and advertising world. He, and other opponents of Enzi’s bill, believe it will hurt smaller brick-and-mortar businesses in the long run as they struggle to develop expensive infrastructure to monitor and report sales, and may even disincentivize them to grow to the point that they’re chalking up more than a million a year in sales.

It’s hard to believe a 5 to 10 percent sales tax imposed on Internet purchases would affect cyber shoppers but an Endicia Poll found 75 percent of respondents aged 18 to 25 say they will buy less online and more in-store just on principle if a tax is enforced.

The face that launched a thousand ‘shits.’ Sen. Enzi’s unpopular bill would not create a new Internet tax, but simply enforce an existing ignored one. (Photo credit: Mike Enzi)

The face that launched a thousand ‘shits.’ Sen. Enzi’s unpopular bill would not create a new Internet tax, but simply enforce an existing ignored one. (Photo: Mike Enzi)

Amazon.com:

It’s a jungle out there

Enzi is facing a monumental challenge trying to sell the public on the idea that he’s just trying to enforce existing commerce regulations. Naysayers, meanwhile, warn the method of tracking sales and collecting correct tax will be a nightmare. Enzi claims the system will be relatively simple. One aspect of the bill that has been poorly campaigned by Enzi’s office is clearly emphasizing where the money goes that is collected. Two local retailers contacted by The Planet mistakenly believed the sales tax would head straight to Washington.

Not so, said Donofrio. “The sales taxes go directly to state and local governments, which brings in needed revenue for maintaining our schools, fixing our roads, and supporting local law enforcement, fire departments and emergency management crews,” he said.

Estimates on exactly how much additional money would head to local government varies. Enzi claims his bill would generate an additional $23 billion to be divvied up by states, counties and cities. The Equality State alone could see some $290 million annually, according to the senior senator from Wyoming.

That’s music to Golightly’s ears. He is for anything that will help local retailers, but it’s the loss of sales tax revenue to neighboring states and large online sellers that also chaps his hide.

“Wyoming doesn’t have a lot of revenue sources to pay for infrastructure here. We are very heavily sales tax dependent in Teton County,” Golightly said. “And this idea that we lose sales tax revenue because a lot of our locals find the advantage of saving money by buying online … that’s damaging. We are losing revenue for critical infrastructure needs every time we click and buy online.”

Golightly also points out the power of place when consumers buy from their neighbors. “We had a consultant come in and he found 72 cents out of every dollar spent in-county gets recycled,” Golightly said. “So when you think of that, when a dollar goes through its fourth or fifth life cycle it’s about two- to two-and-a-half times a dollar that stays here. That perpetuates through the economy. It provides jobs for people and it could eventually end up in your pocket.”

State lawmakers have yet to attempt tightening up sales tax law or streamlining the reporting of online purchases. Other states, however, like Michigan and Minnesota, recently passed their own legislation that would better ensure their citizens pay up when they get their browse on.

The ol’ switcheroo

For years, town and county officials have watched helplessly as tourists and some savvy local buyers have shipped their Jackson purchases across state lines. Big-ticket items like artwork and jewelry commonly ship straight from local galleries and shops to visitors back home. It’s not illegal, but it’s disheartening to watch sales tax revenue fly away.

Former Mayor Mark Barron made public his frustration on more than one occasion during his last year in office.

“I’ve talked about art galleries or retail stores who have been in the practice of saving their customers the 6 percent sales tax,” Barron said. “I don’t know how prevalent that is. I also know of art galleries downtown who have been opposed to that practice.”

Worse than watching visitor tax revenue lost is the shady practice of some locals to have expensive items shipped over the hill to friends in Idaho. Though Teton County, Idaho, also has a 6 percent sales tax, presumably buyers are avoiding Wyoming’s sales tax by taking possession over the hill and never paying either county’s sales tax.

“We did have this problem years ago, and we may still have a little bit of it,” admitted Keith Gingery, Teton County Deputy Attorney. “There is already a law in place for artwork but some are finding ways to avoid it. I’ve heard of people who live in Jackson having a painting FedExed to Victor only to be waiting there with the car running to drive it back to Jackson.”

Golightly added, “That’s a tough issue to solve. I’ve heard of people who do the very same thing – saving an extraordinary amount of sales tax by shipping art or whatever over the hill to a friend’s house and having it show back up in our county the next day. It’s disappointing when you hear that. I don’t know how you avoid it.

“But I also understand that a lot of our retailers that have been on the wrong side of this Internet tax shield that they’ve had to compete against, well, here is an opportunity to have that shield themselves in shipping something out. I get that. Retailers might be resistant to that rule changing because they might find this is their one opportunity to get even.”

Are stories like this urban myth? Would an unscrupulous high roller drop 160 grand on a bronze moose statue and have it shipped to a waiting flatbed trailer in Victor in order to save $9,600 in taxes? Don’t ask Teton County (Wyoming) Treasurer Donna Bauer.

“How do you control that? Is it being done? I don’t know. I don’t go buy expensive artwork,” Bauer said. “The mayor has been quoted several times as far as desiring more enforcement, but I can’t enforce that. Maybe the Wyoming Department of Revenue can.”

What area retailers are saying

Steve Ashley, Valley Book store

Enzi’s whole idea is to level the playing field. And I think it really does. If everyone has to pay the same sales tax there will be less impetus to go online and more [desire] to shop locally. I’ve always admired him. He was the first person of consequence to try that and he’s never got anywhere with it. There is a pretty big lobby that doesn’t want to see it. They’ve always said, “We need the Internet to get its footing and an anti-tax stature will help that.” Well, I think the Internet is doing just fine now.

Online sales have certainly impacted us. It’s not just the sales tax, but 6 percent is 6 percent. If you are small business, it’s tough. A level playing field is actually a really good way of putting it. Give us a chance.

Tom Matthews, Global Treasures

My business has been definitely impacted, as probably most have. The ease of buying online is undeniable. You can sit and take a dump and order something online with your iPhone no matter where you are. As far as being in the gift business, people don’t plan that far ahead so that’s good for us. But that’s changing also with free, next-day shipping. I just wish people would pay more attention to their brick-and-mortar stores. Generally, our rent costs are going to be a lot higher than anyone running a big warehouse out-of-state. I’ve had people come in and take pictures of certain items and unexplainably run off without purchasing.

Mike Keating, Teton Mountaineering

As a retailer working long before E-commerce was an issue, it certainly affects our bottom line. We don’t begrudge anyone getting a deal on free shipping and no sales tax. But for the health of local retailers, I think [Enzi’s bill] would be a good thing. There’s the old adage that every dollar spent in the community is turned over at least five times. Every dollar spent online is gone.

Tourism allows most of us to be here in the valley. We do have a very loyal local customer base as well. Over the years, however, we’ve had people shop here and then say, “We found it online for less.”

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Teton Mountaineering competes with a cadre of online outdoor retailers. (Photo: Teton Mountaineering)

Jeff and Lou Anne Roush, Wyoming Outfitters

Lou Anne: It’s really difficult to tell [how much we’ve been impacted]. I’m not sure it’s measurable for us. Certainly we’ve been affected to some degree. We have seen people come in and take pictures. Whether they are using those to show someone they are shopping for or whether they are using them to find the merchandise online later, we have no way of knowing. The Internet has made us very conscious of matching merchandise with pricing that can be found online.

I sometimes have spent a lot of time with a customer who tries on, say a pair of cowboy boots, only to say, “Thanks, I can find this online for less.” Even when I offer to ship it for free and match the price.

 Jeff: I’m not familiar with Enzi’s bill but I think it would help level the playing field. With no sales tax and free shipping, and the ease of purchasing from home or wherever you are, it’s hard to beat. We often ship out-of-state for people looking to avoid sales tax here. Maybe they don’t end up paying the sales tax where they live, maybe they do. I don’t know.

Jim and Scott Stone, Stone’s Mercantile

Jim: We don’t notice a lot of competition from the Internet. Enzi’s bill to level the playing field might help some but most people are not worried about the sales tax here when making or not making a purchase. Enforcement of the tax – collecting it and the paperwork and all that – I just don’t see how they will be able to do it.

Scott: Personally, I’m against the tax because who wants to pay another tax? But as a business owner I could see it helping to make things more fair.

Cynthia Engelstad Wachter, Jackson Hole Hat Company

We are not really affected by online sales because so much of our business – I would say 80 percent or more – is custom here at the shop. I am also absolutely opposed to taxing online sales. I do a lot of shipping to out-of-state customers and they pay their sales tax. I don’t think the government has any business taxing people, and they wouldn’t know what to do with the money, anyway. I have many politicians as customers and they all agree. Probably 100 percent of the people I talk to would be against this.

Barb Herrick, Scandia Down

We are not affiliated in any way with online corporate Scandia Down; in fact, we compete with that entity, which sucks. Some people use brick-and-mortar shops to touch and feel product, and then go buy online. We try to close every sale here. Some people want to support the local economy. Some don’t care.


About Jake Nichols

Jake is a work in progress.

One Comment

  1. Taxed to Death by Republicans

    February 20, 2015 at 6:49 am

    Get rid of state taxes and then local merchants will stop whining about how unfair the Internet is.

    No matter how well stocked the local merchants are & and how low their prices are, they will never beat the Internet for selection and price. They get about half of my business. 1/4 goes to Idaho Falls and 1/4 goes to Internet.

    If local merchants paid better wages, I’d be more inclined to shop locally. I would have more money and I’d know that their employees were well compensated which would make me more likely to shop locally. I want to support that.

    A national sales tax is the way to go. Maybe that way we can capture all those art sales that go untaxed in Jackson. Add real estate transfer taxes. And close all those tax loopholes for Yachts, Vacation Homes, Jet Owners.

    If hedge fund managers pay lower tax rates on their income than teachers and firefighters then that bothers me more than the lack of an Internet Sales Tax.

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