ND senators push for online sales tax collection

A group of U.S. senators is renewing a push to allow states to collect sales tax from remote retailers that don’t have a physical presence in the state, a move they say would level the playing field between online and traditional retailers.

The Marketplace Fairness Act, which passed the Senate in 2013 before dying in the House, was introduced last week by a bipartisan group of lawmakers that includes Sen. Heidi Heitkamp, D-N.D. Sen. John Hoeven, R-N.D., also supports the legislation, as did both of Minnesota’s senators when it came up two years ago.

The bill has the backing of the massive online retailer Amazon and other businesses like Target, as well as groups like the International Council of Shopping Centers.

“We’ve got a growing coalition of retailers who continue to be interested in this,” Heitkamp said in an interview with the Herald.

Kenny Holweger, owner of Kenny’s Music Shoppe on South Washington Street, said online retailers have a tax advantage over businesses like his. The taxes can start to add up when customers are buying $3,000 instruments, he said.

“They want me to throw the tax in, and of course I can’t do that,” Holweger said. He said it “would help local businesses” if online retailers had to collect sales tax.

Shift to online

Heitkamp said the bill also helps states and municipalities collect tax revenue that they are owed to help pay for basic services at a time when more purchases are being made online. The portion of retail sales made on the Internet have grown over the past decade, from about 2.4 percent of total sales in 2005 to almost 7 percent at the end of last year, according to the U.S. Census Bureau.

But some have argued the bill would result in a tax hike for shoppers. Matthew Glans, a senior policy analyst for the Heartland Institute, wrote in a 2013 letter to the Herald that “imposing such a tax on online and mail order sales would hurt the online economy, hinder tax competition among the states, raise far less revenue than legislators expect and, worst of all, open up taxpayers to a slew of new possible taxes.”

Proponents have argued that the bill is not a new tax itself. Consumers already owe sales and use taxes on Internet purchases, but compliance is “very low,” according to a press release from Heitkamp’s office.

Myles Vosberg, director of the tax administration division at the North Dakota Tax Commissioner’s Office, said there isn’t a good way to enforce the sales tax requirements on online and other remote consumers. Amazon collects sales tax on purchases from North Dakota and remits them back to the state because of its physical presence here, he said.

North Dakota lost more than $5.5 million from the lack of sales tax revenue from remote sellers between 2011 and 2013, according to the press release. The proposed bill would require remote retailers to collect sales taxes and remit them to the state where the purchase was made.

Past attempts

As North Dakota’s tax commissioner in the early 1990s, Heitkamp attempted to impose a use tax on a catalog retailer from another state. The case ultimately landed in the U.S. Supreme Court, which held that only Congress may regulate interstate commerce.

The Senate passed the Marketplace Fairness Act in 2013 by a 69-27 vote, with both of North Dakota’s and Minnesota’s senators voting in favor. The House did not take up the bill.

“It’s been difficult to find a path forward,” Heitkamp said. “I think there’s some new momentum in the House.”

Hoeven said Thursday he’s supportive of the legislation, but wanted to make sure small businesses are protected. He noted that retailers with less than $1 million in yearly online revenue would be exempt from the collection requirement, but the House might be eyeing a higher threshold.

“I think the higher exemption would be good,” Hoeven said.

Rep. Kevin Cramer, R-N.D., wasn’t available for comment this week because he was with family after his father’s funeral, his staff said.

North Dakota Gov. Jack Dalrymple, a Republican, believes the legislation should go forward, his spokesman Jeff Zent this week. North Dakota is one of 24 states that’s part of the Streamlined Sales and Use Tax Agreement, which the state could use to enforce existing sales and use tax laws under the bill.

“We believe in fairness in the marketplace,” Zent said. “We believe in uniformity in sales tax collections.