Local governments are administrative arms of the state of Washington, but you’d never know it from Legislatures’ repeated neglect of them when dealing with tax issues. Consider the just-passed state budget, which requires online sellers to collect a 6.5 percent use tax on sales to Washington customers, and remit it to our state government: Conspicuous by its absence is the local government share of the sales tax.
In 1992, when the U.S. Supreme Court cited burdensome complexity when it blocked states from taxing remote sales from out-of-state sellers, Internet retail was in its infancy, and arguably deserved protection. But now online sales have become a monster, eating the heart out of local and national “brick and mortar” businesses. Witness the just-announced closure of the downtown women’s clothing store Vivala, which too often was used by “customers” to try on garments, then order them online at a discount--and likely, tax free.
That 1992 SCOTUS decision also said that “Congress has the power” to resolve this issue. After a quarter-century, Congress has done nothing. Years of growing revenue losses are why states such as Colorado, and now Washington, are finally taking individual action. Times have changed drastically since 1992, and I’m convinced the states will prevail in court..
During the next legislative session, our lawmakers should amend their laudable action, taxing remote sales, by adding the local government share to the state’s 6.5 percent.
(Foutch is the former Mayor of the City of Olympia)