Reform may bring sales tax to Montana businesses

Colleen Rast has run an ebay store out of the Kalispell area for more than a decade. It had grown enough that, when the economic downturn took her husband's job a few years ago, she turned Great Sky Gifts pro, for some more income. She has since hired two employees and rents a warehouse space to handle all her merchandise, but she fears that new tax laws gaining momentum in Washington could halt her business' growth.

Montanans are some of the most fortunate Americans for many reasons, including the freedom from sales taxes. But if an increasingly vocal coalition of federal legislators and lobbyists have their way, some Montana businesses, like Rast's, will no longer be guaranteed that freedom.

"We honestly couldn't afford it, " Rast said. "We'd rather put our efforts into growing our business. If we collect that sales tax and remit that, we don't benefit from the tax collected.

"Honestly it would only cause a burden for us. "

After the repeated failure of last session's Internet sales tax bills, their supporters have vowed to resurrect the effort in the current session, especially as national attention turns to widespread tax reform.

In the last few sessions, several bills — including the Main Street Fairness Act, Marketplace Equity Act and Marketplace Fairness Act — were introduced in both houses by legislators from Massachusetts, Wyoming and Arkansas.

The Main Street Fairness Act, House Resolution 5660, was introduced to the house in June 2010 by Rep. William Delahunt, D-Mass. The bill would have granted states greater authority in collecting sales or use taxes from sellers that aren't in that state, as long as the state's chose to sign the Streamlined Sales and Use Tax Agreement, to simplify their tax code. The bill went nowhere and Delahunt chose not to run again that November.

The SSUTA is a product of the Streamlined Sales Tax Project, a 24-state coalition that started in 2000 to coordinate the simplification of sales tax codes across the country.

The Marketplace Equity Act, House Resolution 3179, was introduced in the house by Rep. Steve Womack, R-Arkansas, Oct. 13, 2011. It was referred to the House Judiciary Committee, then the Subcommittee on Courts, Commercial and Administrative Law for a few months. Hearings were held in July 2012 and it was over.

Where Delahunt's bill required states to come up with their own exceptions, Womack's bill says that the new sales tax rules wouldn't apply to any business that took in less than $1,000,000 in revenue nationwide in a year, or $100,000 in a given state.

Womack's bill does not mention the streamlined tax agreement, but offers guidelines and standards for simplification.

Sen. Michael Enzi, R-Wyo., introduced the Marketplace Fairness Act, Nov. 9. 2011. This bill goes back to recommending states sign the SSUTA, or doing any other simplification of their sales taxes, and lowers the small business exemption to $500,000 gross annual income.

The bill was referred to the Senate Finance Committee, where it died.

Support and opposition to the measure has repeatedly crossed party lines. ebay's Senior Director of Global Public Policy Brian Bieron, who lobbies on the issue, said that the issue is not about party. The supporters, he said, come from either "state governments who feel there's more money to be had" or large brick and mortar stores like Walmart and Best Buy, which resent paying sales tax in their stores while websites, such as ebay and Amazon, aren't required to.

But that decision comes from a 1992 Supreme Court case, Quill Corp. v. North Dakota, in which the court decided that North Dakota couldn't tax Quill Corp. 's sales unless the company had a physical presence in the state and neither could any state government.

"Right now, states can't send their tax enforcement officials into other states to to go after businesses that don't have a presence in their state, " Bieron said. "(Businesses) should not have to answer to the tax authorities of all these other states. They should only have to answer to tax authority in their own state."

Rast said that these retail chains claim they are being unfairly taxed, but they receive plenty of advantages she said she doesn't get — large volume shipping discounts, tax breaks from local jurisdictions, giant warehouses.

"We can't walk into Fedex and say we want better rates, " Rast said. "Basically when it comes down to it, it's not about taxes. It's about pricing and availability. We have to compete with large business. "

Bieron added that the United States has over 9,000 tax jurisdictions that businesses would have to be prepared to deal with.

"We don't think this ought to be a partisan issue, " Bieron said. "Protecting small businesses from a tax burden should be a bipartisan issue."

And Montana's bipartisan Congress members all agree.

"I'm concerned an Internet sales tax would be an unfair burden on Montana businesses, " Sen. Max Baucus, chair of the finance committee that must approve this issue, said recently. "We're proud to be free from a sales tax in Montana and now is not the time to ask Montana's businesses to jump through unnecessary hoops."

Sen. Jon Tester's communications director Andrea Helling said Tester "views these bills as a new tax on Montana businesses because Montana-based businesses would have to start collecting sales taxes on products they ship to a state that has a sales tax. He thinks any new taxes would place an unnecessary burden on small businesses. "

And freshman Rep. Steve Daines agreed with the senators.

"Like most Montanans, I am opposed to a sales tax, " Daines said. "We know that more taxes and more regulations will only hurt our small businesses, rather than allowing them to grow and create more jobs. The last thing we need to do during tough economic times is find more ways to tax hard-working families. "

As tax reform talks progress, Bieron is sure the issue will rise again. And while Montana's representation seems to be ready to fight it, they could lose.

And though she's keeping an eye on the situation and hopes Congress makes the right choice for her, Rast has other things to worry about.

"We're trying to grow it month to month. So far, we're on target, " Rast said. "We're hoping 2013 turns out to be a great year for us.

"Our goal is to continue to grow and hire more local people. "