Internet sales tax stirs debate
July 31, 2012
Sales taxes on the Internet are stirring concerns among residents. In a recent Letter to the Editor submitted to The Park Record, one Snyderville Basin resident raised his concerns that the sales tax he was charged for an online purchase was the Park City sales tax, but he lived outside of city limits.
"When you purchase something online or from a catalog, the retailer (Amazon for example) looks at the name of the city (rather than the Zip code) and charges sales tax accordingly," wrote Ray Johnson.
And he was right. Problems with internet companies and sales taxes continue to persist. Tax laws regarding the problems were recently presented to both the United States House and Senate, with a hearing on the issue held less than a week ago.
Under current U.S. law, an online retailer is not required to collect a sales tax if that business is not based in the state. Companies such as Amazon, eBay or Overstock are in a deadlock debate with states over whether or not collecting taxes for more than 10,000 separate tax jurisdictions should fall on their shoulders or the consumer.
"The Supreme Court ruled that states can’t require retailers outside that state to collect a sales tax," said Royce VanTassell, the vice president of Utah Taxpayer’s Association. "If Amazon doesn’t have any physical presence in Utah, the state can’t require them to collect that tax.
"There has been a lot of debate going back and forth whether Congress should solve that."
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Despite the Snyderville Basin sales tax set at 6.3 percent, Johnson could have been charged the Park City rate of 7.45 percent instead, a somewhat common problem for unincorporated areas such as the Basin, said Andre Baksh, a Utah Tax Commission Economist.
"It is up to the business to know where they are located and what the applicable sales tax should be," Baksh said. "Park City and Snyderville Basin addresses could be confused on the retailer’s end."
"We do run into that problem," he added, "but our revenue accounting people make the corrections."
Utah still recoups 4.7 percent of collected sales taxes in the state, but the remaining amount goes to the local areas, Baksh continued, with the proper municipality or unincorporated municipality receiving the tax. If a consumer overpaid in sales taxes, they can recoup that added expense with their tax returns.
Nate Rockwood of the Park City Municipal Budgeting Department said the issue made sense, especially if retailers are left to their own standards in charging a sales tax.
"I’m sure it happens," Rockwood said. "With the way mailing addresses are set up, there are mailing address in the Snyderville Basin that read Park City. The online business might enter a Park City sale tax code."
Internet retailers, like their mail-order predecessors, were able to undercut local business by not charging a sales tax in their earlier years, but as businesses like Amazon try to grow to be all things to all people, business models are starting to change. For example, as Amazon tries to limit delivery time, the company has to open more centers across the country, meaning it is based in more states and states can then charge a sales tax under tax law.
"It’s not that tax isn’t due," VanTassell said. "It’s that states don’t have the ability to compel a retailer to collect it. It becomes a use tax, not sales tax, and is still owed."