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What would W.Va. do with internet sales taxes?

By Megan Workman
Chris Dorst
While most supporters of a tax on Internet sales say small businesses are closing because online retailers have an unfair competitive advantage, F.M. Pile Hardware owner Bill Pile doesn't see a negative impact on his store."We have 15 types of locks and if [a customer] wanted this lock would he go online? No," Pile said Wednesday.

CHARLESTON, W.Va. -- West Virginia loses at least $50 million each year by not collecting a sales tax on Internet sales, but state and national leaders already have ideas about how to use the revenue if the state did collect those tax dollars.

Sen. Jay Rockefeller's "radical suggestion" -- which he voiced in an interview with West Virginia Public Radio earlier this week -- is to use the new money to offset the cost of Medicaid expansion under the Affordable Care Act.

"West Virginia is losing as much as $100 million annually in revenues from online purchases where sales taxes are not collected by the retailer. I think we can -- and should -- address this disparity and use the revenue to help pay for the state share of the Medicaid expansion," Rockefeller, D-W.Va., said in an email Wednesday.

For individuals who would be newly eligible for Medicaid, the federal government would pay 100 percent of the costs for three years and never less than 90 percent of the costs in each year thereafter, Rockefeller said.

But the state exchanges don't start until 2014. So for two years, the state would have to pay more than it does now, which is where Rockefeller's suggestion comes in.

"My answer to that is something I wanted for 20 years ... we make the Internet folks pay a 6-percent sales tax on things which are bought off of them because in the mean time they've closed down all these stores in West Virginia because [brick and mortar stores] are trying to do it the proper way," Rockefeller said in the radio interview.

"None of this would come out of the pockets of West Virginians; it would be the companies that would pay."

John Doyle, a member of the House of Delegates, said Rockefeller's suggestion is "interesting."

"I'm not saying we shouldn't use [sales tax revenues] for Medicaid, we should seriously consider that, but there are any of a number of things we should consider it for -- like tax reduction."

Opponents argue that the Internet sales tax is a new tax, but it's not, said Doyle, D-Jefferson. It is a tax that is already owed but not collected, he said.

"It is an equally sound argument to say we can use this for tax reduction because we have some taxes which I think do interfere with improving West Virginia's economy," Doyle said.

Doyle said the business franchise tax and the personal income tax -- where businesses pay taxes on equipment and inventory -- are deterrents to the state.

State tax commissioner Craig Griffith said financing the state's share of the Medicaid expansion is one idea for the potential sales tax revenues. Griffith also suggested putting the money toward improving roads in the state, a proposal that F.M. Pile Hardware owner Bill Pile recommended.

"[Collecting Internet sales taxes] would be better for West Virginia because it'd be more money for West Virginia. If they had an additional $50 million, it might go toward road construction," Pile said Wednesday. "It's not that any of the ideas are bad, but with politicians, it's whatever floats their boat and is on their agenda."

Pile, who owns the hardware store on Charleston's West Side, said he isn't concerned with the lack of an Internet sales tax.

Most supporters of the collection of sales tax revenues on Internet sales say that small brick-and-mortar businesses are generally negatively affected.

"Small businesses on Main Street are having a hard time competing on a playing field that's simply not level," Rockefeller said Wednesday.

Sen. Joe Manchin III, D-W.Va., also said in an email Wednesday that "businesses should be on a level playing field" when it comes to selling goods, no matter how they are sold.

Ann Saville, owner of Taylor Books in Charleston, said she absolutely supports an Internet sales tax. She doesn't see why online sales should have a favored position over in-store sales.

But, like Pile, Saville doesn't see the lack of an Internet sales tax negatively affecting her bookstore.

"People who are buying books in here aren't buying it to get it cheaper, they're buying it to support me," she said. "It's not just one book. They understand the role I play."

Manchin and Doyle said the focus should be on tax fairness to business.

In November, U.S. Sens. Lamar Alexander, R-Tenn., Dick Durbin, D-Ill., and Mike Enzi, R-Wyo., introduced the Marketplace Fairness Act. The bill is meant to collect sales tax on Internet sales.

A similar Internet sales tax bill, the Main Street Fairness Act, was introduced in October. The Marketplace Fairness Act differs in that it creates two options for states to collect sales and use taxes. States could choose between the two options. 

The Marketplace Fairness Act also would exempt sellers who gross less than $500,000 in gross annual remote sales from collection requirements. The Main Street Fairness Act has not yet set an exemption threshold, but a governing board would later determine the appropriate amount.

Reach Megan Workman at megan.workman@wvgazette.com or 304-348-5113


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