Wisconsin Ponders Internet Sales Tax

Times’re a changin’.

Wisconsin could generate as much as $187 million in new tax revenue annually if it extends its sales tax to online retailers based in other states — enough to give about $84,000 to every Wisconsin school or make permanent this year’s one-time $100-per-child tax credit and back-to-school sales tax holiday.

However, Gov. Scott Walker and Republican lawmakers have already signaled that additional funds from such taxation should be used for a different purpose: automatic reductions in state income tax rates.

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On Thursday the Supreme Court’s 5-4 ruling, which did not split along ideological lines, overturned the 1992 decision and said states can tax internet sales.

The ruling doesn’t mean such a sales tax will begin immediately in Wisconsin as it will in many other states that have laws where the court decision automatically triggers a sales tax collection for online sales.

Walker’s office, the state Department of Revenue and the Legislative Fiscal Bureau are still reviewing the decision and declined to comment before completing the review.

So it’s unclear if new legislation is needed or whether the Walker administration can collect the tax from out-of-state companies through regulatory changes.

Walker and the Legislature enacted a law in 2013 requiring income tax rate cuts corresponding to any potential online sales tax revenue collections “as a result of any federal law to expand the state’s authority to require out-of-state retailers” to collect the tax. But that law doesn’t refer to U.S. Supreme Court decisions.

I agree with the decision of the Supreme Court. Whether or not a state can tax inline purchases should be up to the state. But then each state must decide if they want to do it or not.

There is not escaping the fact that taxing online purchases is a tax increase imposed on the people in the state who buy stuff online. That doesn’t necessarily mean that it’s a bad thing since it spreads the tax burden a little wider and puts online and brick-and-mortar retailers on the same footing when it comes to the sales tax.

If Wisconsin law makers decide to impose a tax on internet purchases to reap the projected $187 million windfall and uses it to increase spending, it would be just another tax increase to fuel more government spending. If they impose the tax for the purposes of being more fair, or whatever, and use the tax revenue to offset other taxes while not increasing spending, I might be okay with that. I don’t trust their discipline to resist just blowing any additional tax revenue – especially in an election year.