Online sales tax collection on the rise, solutions sought in statute
Online sales tax revenue was on the agenda for legislature’s lead committee this week.
Members of the Legislature’s Executive Board received a report on Sales Tax Reduction from Remote Sales, which in state statute is the reduction of the sales tax by one-tenth of percent for every $20 million raised by Internet sales, also known as the Partridge Amendment.
Tuesday’s (11/19) report, however, didn’t provide much clarity on whether or not there’s a mechanism to lower the state’s sales tax because there’s uncertainty in how to interpret the statute.
“The language of the statute is unclear,” LRC Code Counsel Wenzel Cummings told legislators, adding the intent of the current law “was not exactly communicated in the actual language of statute.”
The statute was passed as part of 2016’s House Bill 1182, and attempts to clarify the mechanism for reducing the sales tax failed during the 2019 session.
To complicate the matter even further, LRC Senior Fiscal & Program Analyst Jeff Mehlhaff stated “the calendar year 2019 is going to be substantially more” in terms of revenue collection from the online sales tax with his estimate being $85 million in collection, which he added could “potentially be on the low side” and is “projected to be more than a $20 million increase” from 2018 to 2019.
When asked by Rep. Spencer Gosch how his 2019 collection estimate would “pertain to the Partridge Amendment?” Mehlhaff said the statute is “too ambiguous” as “it’s not really clear on when to start counting or what to start counting.”
The Executive Board voted 14-0 to have Cummings and Mehlhaff work with the Bureau of Finance and Management to develop a solution and report it to the board in two weeks’ time.
“Come up with the best possible solution and most illuminating solution,” Sen. Brock Greenfield requested.
ASBSD resolution D2. School Funding – Partridge Amendment, which was passed by at Delegate Assembly recently, states: ASBSD supports legislation giving the legislature the authority to decide whether or not to reduce the state’s sales tax rate by one-tenth of a percent should the revenue collected from the remote seller’s tax – the tax collected by the state on Internet sales – exceed the previous calendar year’s revenue collection from the tax by $20 million.
“We’re going to watch this very closely as it will have a major effect on state revenue and in turn, on state aid,” ASBSD Executive Director Wade Pogany said. “We have a clear position on the matter and will argue against any proposal that is in opposition of our resolution and would negate state aid.”
For updates on the Partridge Amendment, check the ASBSD Blog.
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