E-Fairness Law Up for Discussion

Door County officials will venture into matters of e-commerce on Dec. 12, when the county’s Legislative Committee takes up discussion of a resolution supporting the collection of online sales tax.

The Door County Board of Supervisors was initially set to discuss the resolution at the Oct. 23 board meeting but decided to take the matter back to committee after representatives from Door County Coffee, the Door County Visitor Bureau, and the Door County Economic Development Corporation (DCEDC) argued for a second look at what exactly the county was supporting.

“I requested that they please give our local businesses the opportunity to have some input into the decision,” said Bill Chaudoir, Executive Director of DCEDC. “We do have a number of businesses online, and we’re hoping to have more of them heading there in the future.”

In most states, including Wisconsin, online retailers are only required to collect sales tax if they have a physical presence in the state their customer is buying from. So if, for example, someone in Door County bought an item online from a store located only in Oregon, no sales tax would have to be collected.

Customers are supposed to keep track of what they buy online and pay sales tax on those items when they file their state taxes; but, very few ever do, so the state loses out on revenue.

Twelve states have already enacted so-called “e-fairness” laws that require online retailers to collect sales tax from customers, and there has been discussion in Congress about enacting a nation-wide law.

As it’s currently worded, the Door County resolution expresses support for legislation at the state and federal level for collection of online sales tax, which would bring in an estimated $100 million to $200 million extra for the state.

The resolution was prompted by a letter from the Wisconsin Counties Association (WCA) that says the issue isn’t only one of collecting revenue, but also of protecting brick and mortar businesses.

“It’s an equity issue. Essentially we’re providing a 5.5 percent price advantage to online-only retailers over brick and mortar retailers,” said Kyle Christianson, a WCA Research and Legislative Associate. “Main Street businesses aren’t asking for preferential treatment, they just want online retailers to be treated like everybody else.”

Patrick Palmer of Novel Ideas bookstore in Baileys Harbor used to run an online store alongside his physical one, but he doesn’t currently. He said he would like to see online retailers made to collect sales tax from their customers.

“I think they should collect it like they do anywhere else. If somebody goes and shops somewhere else and gets the same book because it’s less, that’s taking sales away from me,” said Palmer. “[Sales tax] should be for everybody.”

But as Chaudoir pointed out, a number of the county’s businesses do sell their wares online, and any legislation could affect them as well.

Ann Renard of Renard’s Cheese said her business’s website hasn’t yet made a profit, and if she were forced to calculate and collect sales tax from customers dispersed throughout the country in different tax regions, she would probably just shut her website down.

“That’s insane. There’s no way to be able to calculate to do that,” said Renard. “To make money on an online business is tough. I’m looking at it saying someday it’ll hopefully build up, but for now it’s a hole I dump money into.”

Renard does, however, already charge her customers Door County sales tax on the taxable items she sells online and remits that to the county regularly. She said she has no problem with paying taxes on the items she sells online, as long as the system isn’t overly complicated.

“It’s just as if they’d drive up here and buy from my business in Door County, so I charge Door County sales tax,” said Renard. “It’s supporting our community here, and it’s a good thing.”

While a system requiring online retailers to collect sales tax based on their location’s tax rate – as opposed to the rates where each customer is located – would solve the revenue part of the problem, Christianson said it wouldn’t address the equity issue.

“Let’s say someone buys from a state where there’s a 3.5 percent sales tax and Wisconsin has 5.5 percent sales tax. It still costs them less to buy the item online,” said Christianson. “There’s still an inequity there.”

Christianson said that the ideal solution to the online sales tax problem would be for the federal legislature to act on the issue, thus addressing any concerns about unfairness between states that do and do not have “e-fairness” laws.

He also said that if the federal government does enact legislation, it would probably include an exemption for smaller online retailers like those in Door County.

“It’s difficult to comment on what, if anything, will come out of the legislation in Washington, but there’s definitely agreement that there has to be some exclusion for small guys,” said Christianson. “It’s not these small guys that are taking away business.”