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.