Shop On the Internet? In Iowa, That Could Start Costing You More

Iowa lawmakers are moving to close a loophole some businesses use to avoid paying tax on sales through the internet and by mail.

The move would charges sales tax on Internet sales. It would bring the state more tax dollars and address complaints from many brick-and-mortar businesses that they are at an unfair disadvantage because their sales are taxes while Internet sales are not.

The move in the Iowa Senate follows a situation in Texas last year in which that state billed Amazon.com $269 million in taxes officials say were wrongfully avoided, The Des Moines Register reported.

In Iowa, the loophole is costing the state about $6.8 million, according to an estimate by the non-partisan Legislative Services Agency.

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Senate File 2309 would expand the Iowa definition of a place of business to include ones that sell a similar line of products under the same or similar name, or use trademarks that are substantially similar of those used by the larger retailer, the newspaper reported. 
According to the Register, state lawmakers hope their action will get the attention of Iowa’s delegation in Congress, which is looking at an overhaul of commerce laws that allow web businesses to escape sales-tax collection.

As reported, half of West Des Moines business owners participating in the inaugural  said their Main Street businesses are at a competitive disadvantage when compared with web-based businesses that don’t pay sales tax. 

Half of Patch’s Small Business Forum respondents said that Iowa’s congressional delegation isn’t doing enough to advance legislation to correct the inequity between businesses that have an on-the-ground presence and those that exist behind Internet firewalls.

Sen. Pam Jochum, D-Dubuque, who voted to close the loophole in a measure before the Senate Ways and Means subcommittee on Tuesday, agrees that Iowa retailers are at a disadvantage.

“That’s not to mention that the sales tax is something that helps supports all of our services, including schools at the local level and cities,” she told the Register.