When sales tax fails, turn to the use tax
Posted 4/24/18 (Tue)
By Steve Andrist
For the first half of my career I worked for other people.
That made it pretty easy, whenever there was one of those big business-against-the-world issues, to come down against business.
In 1991, when we packed up the family and moved to Crosby to take over the family newspaper business, I started to see things a little differently.
Funny how our experiences color our perspectives.
One of the things we did to try keep the doors open was retail office supply sales. We sold paper and ink cartridges and paper clips and file folders and file cabinets and fireproof safes and rubber bands and just about anything else anyone needed to keep an office organized and operating.
Office supply sales accounted for just 10 percent or so of our revenues, but sometimes that was enough to keep employees in the chairs and the lights on.
And so it aggravated me to no end when I’d read the county commission minutes and see that they were ordering their office supplies from an out-of-state mail order firm called Quill instead of from the local outlet that paid taxes to the county and employed local folk who did likewise.
A common refrain was that Quill had an unfair advantage over local competitors. Based on Quill Corp. v. North Dakota, the U.S. Supreme Court had ruled that because it didn’t have a physical location in the state, Quill did not have to collect sales taxes when it sold a box of printer ribbons to a North Dakota consumer.
With a building on Main Street, we did.
Today, that same issue is before the U.S. Supreme Court, brought there this time by the other Dakota. Only this time the stakes are much higher. In South Dakota v. Wayfair, our neighbor to the south last week argued that the internet has made this a whole new ball game.
Whether it’s Wayfair or Amazon or Shoes.com or any of the others, billions of dollars in retail sales are being made to shoppers without the sellers being responsible for collecting state and local sales taxes.
North Dakota Tax Commissioner Ryan Rauschenberger estimates the state would be $50 million richer if those online retailers were required to collect and remit sales taxes.
Clearly, the playing field isn’t level.
But when we old fogies make this argument to our internet-era kin, they turn the logic around.
We all now live in a technology age, they say, and if local retailers want to be competitive in that environment, they must provide the same convenience and service as Amazon.
Fair point, though as a “legacy” consumer it seems to me that being part of a community carries some responsibility for supporting others who also are part of the community.
Plus, there’s that unfair advantage for those who don’t have to collect sales taxes. Assuming the Supreme Court will rule in favor of interstate commerce over local retailers, here’s one idea for a solution.
Already we have on our books a state law requiring a use tax. Basically, it says if you or I buy something from someone who isn’t required to collect sales taxes, we are required to self-report and pay.
Of course, no one does. Because who’s ever going to know they went online to buy those head phones or lawn tools or kitchen gadgets?
Still, there’s $50 million at stake. Maybe a couple million of it – heck, maybe half of it – could be used for a few years to find out.
You’d think, with a few million at his disposal, tax collector Rauschenberger would be able to hire a few investigators and auditors who could start the process of letting North Dakotans know it’s the law that requires them to pay their use tax.
Further, they could let people know that if the break the law, there’s going to be consequences.
Faced with the possibility that failing to pay $12 in use taxes could make you subject to a $100 penalty, most of us would start to get the picture pretty quickly.
Sure, it would require a healthy dose of ingenuity. Perhaps even some new state laws to establish new enforcement and collection policies and penalties.
But it seems like it wouldn’t be that difficult to get one message across:
It’s the law.