There is no denying the impact the Internet has on today’s society. It’s everywhere and consumers are using it to make purchases in record numbers. Local businesses have accepted this as part of the competitive process, but many Internet companies are benefiting from a competitive disadvantage. These companies are not collecting Sales and Use Tax.

The issue at hand is not developing a new law. It is enforcing the law currently on the books. An Internet company with
affiliates in the state they are doing business in must pay a sales tax. If there is no affiliation, they must charge a use tax. Consumers are
required to report that tax on their tax filings and pay it at that time. A practice that is little used and not enforced.

From a local business perspective, Internet companies are gaining further
advantage and are now even promoting the ability to save their customers more money by not charging sales tax.

As more businesses expand to include Internet sales, it is imperative that they are abiding by the laws in the state they are doing business. Fortunately, the State of Iowa is part of the Streamline Sales Tax Project. More information can be found at the http://www.iowa.gov/tax/educate/SLST.html. It is crucial for businesses to abide by these laws as more states attempt to balance budgets, and will begin looking to enforce Internet Fairness Acts.

Illinois and Colorado have already done so. Amazon has pulled its affiliates from these states in an attempt at retaliation. More states are looking to do the same. It can be a large source of revenue that is collectible under current laws.

A University of Tennessee study projects that total state and local sales and use tax revenue losses from e-commerce sales in the State of Iowa will likely exceed $98.4 million in 2012. That is a great impact to the state’s bottom line and returned revenues back to Counties, Cities and School Districts through the Local Option Sales Tax.

CALL TO ACTION: The DACC Board of Directors voted to support change to the current system making it FAIR, asking for state legislators to take on this issue next session by updating the current sales and use tax laws to:
Frame the sales and use tax structure in a better, more understandable way
Apply the sales and use tax to Internet Companies
Improve the enforcement abilities of the Department of Revenue to collect sales tax on Internet companies
Remove the burden of the use tax reporting from the consumer.

The current tax code is complex and difficult for the average small business owner to understand. The DACC is asking for it to be framed differently so that Iowa business owners can easily follow.

Secondly, the DACC is calling for the enforcement of the sales and use tax law for Internet companies and giving the Department of Revenue the ability to
enforce the tax codes.

Finally, the DACC is asking for the responsibility of paying and reporting use tax to be put back onto the business not the consumer.

The DACC’s plan to move forward will include letters of support to the state elected officials on behalf of the Board and its membership. Additionally, letters of support will be drafted for individual members to send along to their elected officials. The timing of this campaign is being planned after the current session is over as to not interfere with the current budget debate and will have a second phase as the new session begins.

The DACC is also working on communications to educate the public on the importance of this issue on the economy. Businesses contribute to the retail sales tax, commercial property tax and support community endeavors. It is
important to keep them all on a level playing field. Everyone can do their part.