Online sales tax could hit Utah companies

Published: Tuesday, Aug. 30 2011 11:00 p.m. MDT

Supporters of the Supreme Court ruling, however, say the system has allowed companies like Overstock and Amazon to grow into successful businesses.

In 1999, Overstock had 18 employees and did about $1 million in sales, said Overstock President Jonathan Johnson. In 2010, the company had 1,500 employees and did over $1 billion in sales.

"If we had, in 1999, to collect sales tax in every state, which would have meant (thousands of) taxing jurisdictions, that would have been a significant barrier to entry and probably prohibitive for Overstock growing in 10 years to become a major employer and paycheck provider," Johnson said.

The issue of collecting sales tax should be left to individual states rather than Congress, Johnson said. He also said that among the major supporters of the Main Street Fairness Act are big-box retailers like Wal-Mart Stores Inc. who are "trying to squelch competition" from small Internet startups, which could grow to be major players like Overstock.

Some states like California, New York and Arkansas have passed legislation requiring Overstock and other online-only retailers to collect sales taxes on purchases even if they are out-of-state, provided they meet some threshold for doing business in the state — either a certain dollar amount or through in-state affiliates.

In response, Overstock — along with Amazon — decided to cut ties with the affiliates — companies that operate retailing websites that market products offered through major retailers like Overstock or Amazon and even considered legal action against some of those states, Johnson said.

Currently, 45 states levy sales taxes and require any retailer with a physical presence to add the amounts on qualifying in-state transactions.

While online retailers argue that collecting sales taxes on all transactions would cost millions of dollars to implement, stifling future growth, states such as Utah are working to make it simpler for online merchants to gather the sales tax in an effort to collect the much needed otherwise lost revenue. State Sen. Curt Bramble, R-Provo, said Utah is among a large group of states involved in the proposed adoption of the Streamlined Sales and Use Tax Agreement that was created in 1999 by the National Governor's Association and the National Conference of State Legislatures to make collecting sales tax easier.

The measure would work in conjunction with the Main Street Fairness Act to improve collection of sales tax through e-commerce, by simplifying and modernizing the collection.

e-mail: jlee@desnews.com

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