In their Feb. 8 editorial, “Online purchases are not tax-free,” Sens. Curt Bramble and Wayne Harper and Rep. Mike McKell make several incorrect assertions about Overstock.com and its position on sales tax and the Internet.
The first incorrect assertion is that Overstock.com calls their bill (H.B. 235) “a tax on the Internet.” Overstock.com never said that. Ever.
The debate is not about tax on the Internet. Rather, it is about who collects taxes for states and under what circumstances. Under the U.S. Constitution, Congress has exclusive authority to regulate interstate commerce. Since this is an area of regulating interstate commerce, Overstock.com believes Congress (not Utah or any other state) can and should frame a law to fairly resolve this state tax-collection problem.
Accordingly, Overstock.com has repeatedly lobbied Congress to enact a law that allows states to use out-of-state retailers to collect tax, but sets standard thresholds of fairness — meeting minimal principles that ease burdens, complexities and costs out-of-state retailers bear in taking on the states’ collection job across state lines. In fact, Overstock.com has given its full-throated support to such efforts by Rep. Jason Chaffetz and Rep. Bob Goodlatte.
The second incorrect assertion is to imply that Overstock.com does not “play by the same rules as everyone else because (it) benefit(s) from a marketplace skewed in (its) favor.” Again, to use their own word, this is just more “misinformation.”
These legislators know that Overstock.com collects and remits sales tax on all its sales in Utah. Overstock.com does not benefit from Utah’s current tax-collection laws nor does it want a skewed marketplace. Overstock.com asks Utah to follow the U.S. Supreme Court ruling from more than two decades ago, which clearly held that states cannot force out-of-state retailers to be their tax collectors, without those retailers first having an in-state physical presence. Rather than advance the constitutionally suspect HB 235, these legislators should use their significant national influence (Bramble and Harper each lead national organizations focused on this issue) to get Congress to act. Gov. Gary Herbert, as chairman of the National Governors Association, should do the same rather than support bad state laws.
The third inaccuracy is the assertion that HB 235 continues a tradition of “a free and level marketplace” in Utah. Here is where the truth suffers most.
HB 235 only puts Utah-based advertisers at a competitive disadvantage as they try to compete in a national marketplace — just as other laws in other states have done to their advertisers. It seems that Bramble, Harper and McKell have singled out Utah’s ad businesses to contain the pain. These ad businesses will surely lose valuable jobs and contracts, but these legislators seem to feel that at least the pain is localized.
I have a challenge to this legislative trio to illustrate this point: Broaden your bill’s coverage to include in the fallout zone your own professions (i.e., law, accountancy and real estate) so that if remote sellers use a Utah lawyer, Utah CPA or a Utah real estate company, the sellers will have signed up to shoulder the heavy burden of collecting tax. Of course, that is bad policy — just like targeting Utah advertisers is bad policy. And it would still spectacularly fail to accomplish what you claim to want.
Overstock.com wants a solution to Utah’s tax-collection problem. But no one will get there unless truth has a seat at the table.
Jonathan E. Johnson III is the chairman at Overstock.com, Inc., and has declared his candidacy for the Republican nomination for governor in Utah.