Utah lawmakers are hoping to bring in millions of additional tax dollars from online retailers, but a bill being proposed might be in conflict with the U-S Constitution. Federal law currently allows the state to collect taxes from online retailers as long as they have a physical location in that state, like a store or distribution warehouse. Senate Bill 226, sponsored by Republican Senator Wayne Harper would empower Utah to collect taxes from some out-of-state online retailers.
Aaron Schubach says as more business transactions move online and away from brick and mortar stores, SB 226 would help level the playing field.
“$180 million is what the state stands to gain," Schubach says. "It’s $180 million that needs to be reinvested in education and Medicaid efforts and expansion and some of those other things.”
Schuback owns Standard Optical in Salt Lake City. The company does most of its business on the ground, but has a small online presence as well.
SB 226 would allow the state to collect sales taxes from online retailers who do not have a physical presence in Utah if they do business with local advertisers for example.
That’s something Mark Griffin says violates existing interstate commerce laws. He’s the general council for Utah-based Overstock-dot-com.
“Our larger concern is with the patchwork quilt of state laws that follow this unwise, unconstitutional pattern that are developing across the country," Griffin says.
Griffin says Overstock terminates local advertising agreements with states that pass such laws.
He adds Overstock is not opposed to a federal solution.
Legal counsel for the state legislature have attached a note to the bill recognizing it may be deemed unconstitutional.
Lawmakers in a Senate Committee voted unanimously on Tuesday to advance SB 226.