A bill that would require some out of state internet retailers to collect sales tax from Utah customers narrowly passed the UTAH Senate this morning. But if SB 226 becomes law it could be challenged by the Justice Department.
Federal law prohibits Utah from collecting sales tax from online businesses unless they have an office or storefront in the state. SB 226 would expand the rule to include remote retailers who use local advertisements or forge other local agreements.
GOP Senator Steve Urquhart opposed the bill. He questions its legality and the message it sends to businesses.
“The message that is received by this bill is that we don’t want them,"he says. "And they will stay away. They won’t expand in this state. I think that we’re doing significant damage to ourselves with this bill.”
Senate President Wayne Niederhauser supports the bill. He says out-of-state internet sales are diverting tax dollars away from Utah when the state needs it most.
“We’re going to be faced with Medicaid, transportation, higher ed costs and a shrinking tax base," Niederhauser says. "What happens is we’ll have to raise taxes on a smaller base.”
He says the issue should be addressed at the federal level, but Congress continues to delay action. The bill passed 15 to 12 and will be transferred to the House floor for consideration.