Say goodbye to tax-free internet purchases

COEUR d’ALENE — Idahoans buying products over the internet will now have sales tax collected on most purchases, thanks to a bill Gov. Butch Otter signed into law Thursday.

Known colloquially as the internet sales tax bill, H587 changed existing law to require all out-of-state retailers to collect sales tax on purchases made by Idaho residents if they annually sell more than $10,000 of products to Gem State customers.

Current law had required payment of sales tax on online purchases, but had left it up to individual consumers to report those sales taxes to the state.

“Probably less than 5 percent of our citizens do that,” said Rep. Eric Redman, who supported the bill.

Coeur d’Alene Chamber of Commerce CEO Steve Wilson praised the legislation, which the Idaho Chamber Alliance has promoted for the past several years.

“We’re excited they listened to us and they passed the bill,” Wilson said.

He said the bill levels the playing field for brick-and-mortar businesses competing with online retailers.

“We have many fine retailers in Idaho that collect our Idaho tax, pay Idaho income taxes plus support employees who also live here and pay taxes,” Redman said. “Let’s support Idaho businesses.”

Sen. Mary Souza supported the bill because it “starts to level the playing field for our in-state brick and mortar retailers.”

Last year, Amazon began collecting sales taxes on purchases by Idaho residents, which are turned over to Idaho government coffers. An Idaho State Tax Commission spokesman said Friday the agency could not confirm how much money Amazon had collected in sales taxes due to confidentiality requirements in state law. The internet sales tax bill’s sponsors, Reps. Lance Clow and Mike Moyle, estimated the law would result in an additional $22 million — $37 million in tax revenue for state officials to spend.

Idaho Freedom Foundation Vice President Fred Birnbaum said the organization, which had opposed the tax for years, would have been “neutral to supportive” if they had known the Legislature was planning to offset the new tax revenue with a child tax credit. On March 12, Gov. Otter signed H463 into law, which created a nonrefundable child tax credit of $130 per qualifying child. A second bill to boost the nonrefundable child tax credit to $205 per qualifying child, H675, awaits his decision as of Friday. Birnbaum said the total of such child tax credits will offset the estimated new tax revenues collected via internet sales taxes.

“It’s a reasonable offset,” Birnbaum said.

He added that IFF was also concerned the added administrative cost of collecting sales taxes would disproportionately impact small businesses. Rep. Paul Amador suggested the change should simplify things for Idaho residents since they won’t have to manually track and pay the sales taxes in question. The new law will take effect on July 1.