We’re about to learn how Wyoming consumers react when they must pay a sales tax they should already be turning over to state government but have been allowed to keep.

How do you think they will handle it when by law online retailers have to collect state sales and use taxes? Will people grumble because they consider it a “new tax” or will they realize that in a cash-strapped state like Wyoming, government needs all of the money it can collect, by any means necessary?

For my money — at least the amount I don’t have to fork over in taxes to the state — I think there will be a lot of wailing and gnashing of teeth but after the initial shock it will be generally accepted as part of doing business over the Internet.

That isn’t exactly how the idea has gone over on the federal level, though, and with many consumers struggling to keep every penny as much as the state is, the result could be a backlash at the polls against politicians who vote in favor of a bill that requires out-of-state Internet companies to collect state sales tax and then send it back to Wyoming.

House Bill 19, sponsored by the Joint Revenue Interim Committee, has so far flown under most consumers’ radar. That will end this week when the entire Wyoming House considers the bill, which the House Revenue Committee unsurprisingly passed unanimously last Friday.

Wyoming consumers are now required to pay state sales tax on Internet purchases but the law isn’t enforced. How many times have you said to yourself, “I just bought an expensive ring from a company on the Internet and now I should go down to the State Revenue Department and ask for a form so I can voluntarily pay my debt?”

“Never” is the answer for almost everybody. U.S. Sen. Mike Enzi, sponsor of the federal Marketplace Fairness Act, jokes, “I think there are three people in Wyoming who send [the sales tax] in every year. It’s hard for people to keep track of. You need a collection method.”

Enzi saw his bill pass the Senate 75-24 but it’s been hung up in the House. So businesses throughout the country aren’t required to collect sales and use taxes for states on Internet or catalog purchases. The Wyoming senator has taken some heat nationally from consumers for his alleged “pro-tax” views, but it hasn’t hurt him in his own state, where he’s easily won re-election.

Some online retailers, including Amazon, the nation’s largest, already collect sales taxes for states. Amazon, which has agreements with 34 states, will begin collecting sales taxes for Wyoming beginning in March.

The gigantic company’s move was praised by Gov. Matt Mead, who noted it comes at a time when Wyoming faces a huge budget crisis. “The additional tax collections will not come close to solving the issues the state faces, but will obviously help,” Mead said. “Wyoming businesses are at a disadvantage when Internet businesses fail to collect tax. This is an important step in the right direction.”

The governor encouraged state lawmakers to pass HB 19, which would require other large online companies that do not have a physical presence in Wyoming to collect and remit the funds to the state. It would cover Internet vendors who sell at least $100,000 worth of their product in the state or record at least 200 sales in Wyoming. In addition, the bill would require the state to take court action to enforce the sales tax collection if that is needed.

South Dakota recently passed a law requiring the collection of state sales taxes on Internet sales, and the Wyoming Department of Revenue believes that case could provide a test of whether states can actually enforce collection of the taxes by online vendors.

Under case law, retailers currently don’t have to collect states’ sales taxes because the U.S. Supreme Court ruled in its 1992 Quill vs. North Dakota decision that online sellers have a choice to collect the sales tax, which puts the onus on customers to pay what is called a use tax.

But as several of the dozen or so HB 19 supporters who testified Friday to the House Revenue Committee said, the high court’s decision was made when the Internet was in its infancy. When a test case eventually comes before the Supreme Court that reflects modern online transactions, supporters contend, the court will quickly overturn Quill.

State revenue officials, state and national retail business associations and local Wyoming small businesses all told the House panel that HB 19 would level the playing field for brick-and-mortar stores to compete with online companies that have an advantage because their customers don’t have to pay state sales taxes. Several testified that the amount of the savings from unpaid sales taxes is a major factor in whether a shopper goes to a local retail store or peruses web pages looking for the best deal.

Chris Brown, representing the Wyoming Retail Association and the Wyoming Chamber of Commerce, said out-of-state online retailers get to play by a different set of rules than Wyoming’s main street retailers “that are charitably giving in their communities, and the ones that are collecting taxes that pay for critical infrastructure and services.”

Shelley Simonton, director of the Wyoming Association of Municipalities, said her group strongly supports the bill because members are utterly dependent on sales taxes that go back to communities to pay for infrastructure.

“Every exemption costs us a pothole refill, a water tank issue,” she said. “There are many communities now that aren’t plowing the streets. They just can’t afford it.”

Patrick Collins, owner of The Bicycle Shoppe in Cheyenne, said he and other retailers have to offer large discounts on products to compete with online vendors. “I just want to see a level playing field,” he said.

Rob Monroe, who owns a Casper florist shop, said he ships flowers out of state and competes with some big players nationwide “who can ship things a lot cheaper than I can. That 5 percent we’re collecting on sales tax is the difference between profit and loss in my industry.”

But Brett Glass, a Laramie Internet service provider who was the lone HB 19 opponent at the committee meeting, pointed out that under current federal law the state bill would be illegal. He also claimed that small businesses in Wyoming would be hurt by the proposed law.

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Glass said the committee’s HB 19 hearing wasn’t well publicized and predicted more opponents will fight the legislation in the House and, if it clears that chamber, in the Senate.

“Unfortunately the public was blindsided by this,” Glass said. “Lobbyists knew this bill was coming.

“Members of the public, especially the little guys who had their heads down actually working at their small businesses, didn’t know,” he said. “The law of the land is that this is illegal. We will undoubtedly be embroiled in lawsuits. Amazon favors this because they want to establish local distribution points, they want to have local affiliates, they even want to have local server farms and therefore would have a presence in the state so [their customers] would have to pay the tax anyway.

“A lot of online vendors are fighting this really hard,” Glass added. “And it certainly benefits the big-box stores who are the lobbyists behind this.”

The chances for HB 19’s success have increased tremendously because of the budget crisis caused by lower tax revenues for state government due to the downturn in the energy industry. The need for a quick influx of any revenue no matter what size will likely be the deciding factor for state lawmakers. The level playing field argument is also one that should register with legislators.

The timing of the bill also increases the chance that if the Supreme Court accepts a test case that will determine this issue for the entire country, it may very well come from Wyoming.

Kerry Drake

Veteran Wyoming journalist Kerry Drake has covered Wyoming for more than four decades, previously as a reporter and editor for the Wyoming Tribune-Eagle and Casper Star-Tribune. He lives in Cheyenne and...

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  1. The issue glossed over by the legislature and the proponents of imposing sales tax on out of state internet vendors with no physical nexus in this state – or likewise vendors in Wyoming who provide taxable services/product to out of state customers is the regulatory burden imposed on these businesses. Collecting sales tax on behalf of the state is not a simple process but can be a significant costly burden. $100,000 of sales in Wyoming is a pretty small threshold.

    In Wyoming, you remit tax to one entity – the State. However, you could conceivably have 23 different rates to collect and remit depending on the sales tax rate in a particular county. In other jurisdictions it is even worse. In Colorado as an example, you have State sales tax, possibly a county sales tax, a city sales tax and multiple special district sales taxes. You could be filing multiple reports with multiple jurisdictions beyond just one to the State as you do in Wyoming. I have worked with clients in other states that have had to hire a person whose primary responsibility is filing sales tax reports and remitting funds to the various jurisdictions where they provide products to customers.

    Then throw into the discussion what is taxable. The definition of taxable in Wyoming is different than other states. Even scarier is the movement to more broadly define “nexus” beyond the physical presence tests currently in place. Several states are aggressively pursuing businesses that have no physical nexus for not only sales tax, but state income taxes. How cost effective is it to pursue the State of__________ for imposing additional taxes possibly in error?

    Be careful of what you ask for Wyoming. The burden you impose could be imposed on businesses in this state that operate globally. When the burdens and costs to comply with government regulations becomes too high, business will not expand. If margins are already that tight, how to you justify the additional costs collecting sales tax on behalf of an out of state jurisdiction that potentially eliminates your profit to begin with? Sure, if all I want my business to do is sell on Main Street and limit my horizons to Main Street, then it has no additional impact on my business and it “levels the playing field.” But if I want to grow and expand my business, not much incentive if i am going to spend my hard earned profits on complying with all of the various governmental jurisdictional sales tax requirements.

  2. Alas, there’s more to the story than presented above.

    HB19 attempts to force companies selling products over the Internet to collect sales taxes, even if the transaction crosses state lines and involves a vendor which has no physical presence in the state. The US Supreme Court has ruled such taxes to be unconstitutional.

    While these taxes are falsely claimed to help main street businesses, their real benefits flow to large “big box” stores — such as Walmart, Target, and Home Depot — which are based out of state. Amazon, which maintains servers at Green House Data in Cheyenne and will be running trucks to and through our state, has “nexus” with Wyoming as per Federal law, which means it DOES have to collect tax. But to disadvantage its online and main street competitors (and even small online sellers which it hosts in its own online “marketplace), it wants to force other vendors which are not required to collect the tax to do so. In fact, it actually seeks to profit from sales and use taxes while penalizing smaller businesses that use its e-commerce site; see

    http://www.salon.com/2011/12/01/amazon_the_tax_bully/

    for more on this.

    Truly local businesses in Wyoming — because we have the smallest population of any state — MUST export their products to grow. And because of the coal bust, it is urgent that we develop new businesses that export products as we diversify our economy. If we impose such taxes, it will ultimately backfire on us as other states do likewise, harming new and developing businesses here in Wyoming — including main street businesses. As an Internet service provider, I am fortunate that my services have been permanently exempted from taxation by Federal law. However, I provide Internet service to many fledgling businesses which sell their products online. For the sake of Wyoming’s economy, I would like to see them prosper rather than be hit with the crippling burden of collecting taxes for — and, possibly, being audited by — the governments of as many as 44 other states with which they have no relationship and where they have no physical presence.

    These taxes would be regressive — hurting Wyoming’s low-income residents the most — and will also severely hurt rural Wyoming residents who simply do not have the option of shopping locally for many important goods. Even if they are strong advocates of shopping locally, there are many times when they cannot do so and MUST shop online. They should not be penalized for doing so. This may be why the WTE poll regarding HB19 at

    http://www.wyomingnews.com/do-you-agree-with-a-bill-being-debated-by-the/poll_f1b2e4dc-d9d7-11e6-b574-6f80960fbc52.html

    is running 2:1 against, even though the description understates the impact of the tax by incorrectly stating that only “large” retailers would be required to collect it. (The way the law is now written, the smallest sellers — who sell through aggregators such as eBay and Etsy, would be hit immediately… and hard.)

    Finally, because the legislation is unconstitutional (it is touted as “protecting” local businesses — even though it does not — and is therefore admittedly a protective tariff on interstate commerce), it will prompt extensive court battles which will likely cost us as much as would be collected. What’s more, as in other states, any money received will have to be kept in a reserve account until the issue of the constitutionality of the law has been settled. Given the current political climate and the likely “strict Constitutionalist” philosophy of any Supreme Court Justice nominated by our President-elect, it is virtually certain that we’d have to give all of the money back.

    The House Revenue Committee rushed this bill through, scheduling its hearing on HB19 for 8 AM on its very first meeting day. There was black ice on the highways, and I literally risked life and limb to be there; however, most citizens were not even aware of the bill or the meeting (of which there was barely a day’s notice) at that time. Thus, while I did my best to present the case of the public, small business, and residents of the state as a whole, the large retail lobbyists dominated the discussion and the public was not appropriately represented.

    For more on the issue of Internet taxation, see the truly prescient report at

    http://bit.ly/2idEtFT

    The report was written a few years ago, and everything in it has come to pass as predicted.

    It is vital that Wyoming citizens contact their Senators and ask them to vote against this bill, which received a very mixed response in the lower chamber. It only takes a minute to do this. Go to http://bit.ly/15CQObz, click the button that says, “Continue, and ask your Senator to vote against HB19.