Move afoot to require out-of-state firms to pay taxes for online sales

Each day, Crossroad Books owners Mark Patterson and Sharon Ager feel like they're fighting an uphill battle.

The couple, who operate the Eau Claire bookstore at 2803 E. Hamilton Ave., don't believe it's fair that they are forced to charge customers 5 percent state sales tax on the books they buy, while some of their online competitors forego that charge.

"Our opinion is that Internet businesses should collect sales taxes, should be taxed just like local businesses are," said Patterson, whose business recently moved from its longtime downtown site.

The Wisconsin Association of Counties agrees. The lobbying group is urging Wisconsin's county boards to support a WCA-backed resolution urging state legislators to force all companies making Internet sales in the state to collect state and local taxes.

Currently, many out-of-state Internet sales companies, such as Amazon, don't collect the 5- to 6 percent sales tax that businesses headquartered in Wisconsin, including firms based in the Chippewa Valley, must charge, said Kyle Christianson, WCA research and legislative associate.

That gives Internet companies doing business in the Badger State but with headquarters elsewhere a clear advantage, Christianson said.

Generally speaking, any business with a physical store, a distribution center, a headquarters or other presence in Wisconsin must collect state and local sales tax. Online businesses that don't have a physical presence in the state don't have to collect the tax.

The state Department of Revenue estimates Wisconsin missed out on $157 million in 2012 in state and local sales taxes not collected from online sales from out-of-state companies. In Wisconsin, the state sales tax is 5 percent and counties can impose a one-half percent tax as well.

Christianson said it would be ideal if the federal government passed legislation streamlining rules for all Internet sales. The House and Senate are considering bills to do that.

But in the absence of any federal action, Christianson said, the WCA favors the state adopting rules to rectify the situation.

Call for reform

Complying with sales tax rules can be a headache for online businesses.

Gray Powers, vice president for Powertex, an Eau Claire-based online business that sells promotional goods, said his company spends time and money wading through a host of different sales tax rules for the different states and municipalities where they make sales.

When Powertex sells goods to customers in Florida -- a state where it has a presence -- it must collect one sales tax in one city and another in a different city, because in Florida different municipalities are allowed to have different local sales taxes. The company faces a different situation in Minnesota, where clothing is not taxed.

"For us, the big thing is simplification," Powers said.

Counties throughout Wisconsin are expected to act on the proposed resolution in coming weeks. In Dunn County, the Executive Committee on Tuesday endorsed the WCA-backed measure. The County Board, which has the final say, is expected to vote on the issue at some point.

County Board Chairman Steve Rasmussen said charging sales tax to out-of-state companies selling products online is a matter of fairness.

"Those Internet retailers have an unfair edge," he said. "It's not fair to the brick-and-mortar businesses that are paying sales tax."

Swedien can be reached at 715-833-9214, 800-236-7077 or jon.swedien@ecpc.com.

(c)2012 the Leader-Telegram (Eau Claire, Wis.)

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Tags: business, wisconsin