Internet Sales Tax Legislation Shelved in Utah
- Mar 18, 2016 | Gail Cole
Two measures seeking to apply Utah sales tax to certain Internet sales are dead. The House Revenue and Taxation Committee did not pass HB 235 out of committee, and Rep. Mike McKell withdrew SB 182 from consideration. This comes as a blow to traditional brick-and-mortar retailers who compete with online sellers, but numerous bloggers are relieved.
Moms v Main Street
McKell’s decision to withdraw his bill was motivated by discussions with a number of “mommy bloggers,” women who supplement their household income with revenue generated from click-through advertisements on their blogs. One such woman said the $100 a month she earns from her blog is “how we bought our new house.” Another said she had moved to Utah from California after the companies she promotes on her blog terminated their contracts in response to California’s Internet sales tax legislation.
Although Amazon now collects California sales tax, it has indeed terminated contracts with affiliates in several states with click-through nexus legislation. The Amazon Associates Program Operating Agreement reads, in pertinent part:
“[I]f at any time following your enrollment in the Program you become a resident of Arkansas, Maine, Missouri, Rhode Island, or Vermont, you will become ineligible to participate in the program, and this Operating Agreement will automatically terminate, on the date you establish residency in that state.”
So when Rep. McKell received an email from Amazon in which the online seller threatened to terminate its relationships with affiliate advertisers in Utah, it gave him pause. “Given the fact that Amazon was really willing to pull those affiliate contracts, in the end there was no benefit to the state because we weren’t going to collect that online sales tax and we were going to lose that revenue in income tax from those families” (Salt Lake Tribune).
On the other side of the coin are Main Street sellers, Utah retailers who say their online competitors have an unfair advantage because they don’t charge sales tax. David Davis, president of the Utah Retail Association, told the Salt Lake Tribune that “there were enough votes to pass the bill” that McKell pulled. He is sympathetic to the plight of the bloggers; “On the other hand, we have brick-and mortar businesses that are present here in the state that are employing Utahns, that are paying property taxes, that are paying payroll taxes, and are main streets are drying up.”
Although dead for now, remote sales tax legislation may be resurrected during the 2017 session.
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