Taxing Online Sales Would Boost North Dakota Sales Tax Revenues By Less Than 1%

heidi heitkamp

heidi heitkamp

Senator Heidi Heitkamp recently used her first speech on the floor of the US Senate to call for a massive expansion of state taxing authority that would cost online shoppers billions upon billions in new taxes every year by allowing states to collect sales taxes from online retailers with no physical presence within their borders. What’s more, online retailers would be saddled with millions in new compliance costs to track thousands upon thousands of state and local taxing jurisdictions, each with their own set of exemptions.

But Heitkamp, who is unfortunately joined in her position by Senator John Hoven (Rep. Kevin Cramer is still on the fence), is trying to sell this expansion of taxation as not really being a tax hike at all.

“[Senator Heitkamp] said the bill does not impose any new taxes; it enforces existing ones,” reports the Bismarck Tribune, rather uncritically. Heitkamp is even trying to cast the tax expansion as tax relief. “In North Dakota, she said, it could help buy down property taxes for residents.”

That’s a little hard to believe. According to the North Dakota Tax Commissioner’s office, the impact on state sales tax collections would be tiny:

Kathy Strombeck, director of research and communications for the North Dakota Tax Department, estimates that the state loses between

$7.5 million to $10.2 million per year in sales and use tax on Internet purchases made by consumers.

In the current biennium through February, the State of North Dakota has collected over $1.8 billion in sales tax revenues. Even if we use that figure to represent the entire biennium’s sales tax collections (by June they’ll be well over $2 billion) a $10.2 million increase in collections would be a 0.56% increase.

That’s tiny, especially in terms of what the expansion of this tax will cost in terms of compliance by online retailers and enforcement by the state’s taxing authorities.

But this tax expansion isn’t being sold (at least in North Dakota) as an avenue to higher revenues. It’s being sold as a bid for “fairness” in the marketplace. As if it’s fair to companies that don’t have a physical presence in this state, and use none of the state government’s resources, to tax them to fund the state government.

There’s nothing “fair” about that. And it’s a little hard to imagine that tax revenues amounting to less than 1% of all the state’s sales tax revenues is having any sort of an unfair impact on brick-and-mortar retailers.

This is little more than a foot-in-the-door for more taxes, and more regulation, of internet commerce.