Walker: Online sales tax revenues would be used to cut taxes elsewhere

Photo by Michelle Stocker, The Capital Times

Gov. Scott Walker says he plans to implement a sales tax for online purchases from out-of-state merchants, but use the additional revenue to reduce other taxes.

But Walker did not set a hard deadline on when the state would begin collecting the tax.

That leaves the Department of Revenue to work out details of when and how to start collection and whether to do so administratively or legislatively through the next state budget.

“It shouldn’t be a tax increase, it should be just leveling the playing field for retailers and other operations in the state,” Walker told reporters at an event yesterday at the UW-Madison Center for Dairy Research.

The governor’s comments come about a week after the U.S. Supreme Court ruled on a case from South Dakota that will allow states to collect sales taxes from online merchandisers who do not have a physical presence in the states where the goods are purchased.

The state currently collects some online sales tax from businesses that have a presence in the state, including Amazon.com, which has distribution centers in Wisconsin.

The U.S. Government Accountability Office estimates Wisconsin stood to gain between $123 million and $187 million in revenue from remote online sales in 2017.

Part of what DOR will have to determine given the Supreme Court decision is the threshold at which to begin collecting the sales tax to prevent violating the Constitution’s interstate commerce provision. South Dakota, for instance, requires any entity with a minimum of $100,000 in sales or 200 individual transactions within the state to collect online sales tax.

Walker also said his legal team is working to determine whether collecting online sales tax due to the U.S. Supreme Court decision invokes a 2013 law that requires the state to offset revenue collected through the online sales tax by reducing the the state income tax.

After the state begins collecting the tax, DOR would take 12 months to study the revenue brought in. The state wouldn’t be allowed to reduce income tax until after such revenue was determined.

If the Walker administration finds the state law is not automatically invoked, Walker said he’d find ways to decrease the tax burden through the state budget process, which could include expanding the child tax credit or considering tax relief for seniors.

“How we do that, I think, will be part of a larger discussion later this summer going into the fall on our plans for the next state budget with this money and with other dollars we think are available to help lower the tax burden on working families,” he said.

DOR Secretary Richard Chandler told reporters at Walker’s event his department will take as much time as it needs to determine how to handle online sales tax collections.

Part of the equation is determining compliance and seller exemptions, which would almost certainly mean the state would collect less than the up to $187 million it’s currently losing out on in online sales tax revenue.

“We’ve got to work through, understand the court decision and just seeing what the ramifications are in terms of what our statutes say,” he said.

Leaders of both chambers say they’ll wait until after the election to determine how to address the matter.

A spokesman for Republican Assembly Speaker Robin Vos told WisPolitics.com the lawmaker at this point believes the 2013 income tax reduction law would automatically be invoked if the sales tax is collected on those online sales.

GOP Senate Majority Leader Scott Fitzgerald in a statement said he is awaiting analysis from the Legislative Fiscal Bureau and DOR.

“Sales and income tax decisions are typically handled as part of the biennial state budget. We do not anticipate an extraordinary session on this issue,” he said.

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