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Sales Tax News Week of January 12

A New Internet Sales Tax Bill

The biggest sales tax news this week came out of the House of Representatives. House Judiciary Committee Chairman Bob Goodlatte (R-VA) and Representative Anna Eshoo (D-CA) are working on a new bill in the wake of the failed Marketplace Fairness Act, this time called the Online Sales Simplification Act of 2015. The twist is that Internet sellers would collect sales tax using the rate of their place of business (known as “origin sourcing”) instead of the rate of the buyer (“destination sourcing”). This is an issue we’ll delve into further next week.

Colorado Revenue from Marijuana Sales Tax

One of the expected benefits of the legalization of marijuana in Colorado was the tax revenues it would bring in. Between analysts the the governor, the anticipated revenues were supposed to be between $67 and $100 million dollars. However, in reality that figure appears to be much less, around $58.7 million instead. Why? For one, medical marijuana is taxed at a much lower rate (2.9% for medical marijuana versus 12.9% for recreational). Even though it’s harder to qualify for medical marijuana, it’s far from difficult to obtain. Second, the illegal sale of pot hasn’t gone away just because the drug itself was legalized; there are still sellers doing business off the books.

States Debate Taxing Groceries

Where there’s pot, there’s snacks…how’s that for a segue? As background, you should know that many states don’t impose a sales tax on most groceries. Exceptions are often things that aren’t necessary for sustenance, such as candy and soda. (As an interesting aside, states vary on whether water is taxable.) The grocery tax has been in discussion in a couple of states, in particular, in Idaho, where groceries are currently taxed. Although citizens currently receive a $100 tax credit, some feel that it’s too much of a burden and have called for an elimination of the Idaho grocery tax. At the same time, the state of New Mexico, where a 2005 “payback” is expiring, have debated reinstating sales tax on groceries. However, it appears unlikely to move forward.

A Permanent Ban on Taxing Internet Access

Representatives Eshoo and Goodlatte were also busy working on a permanent version of the Internet Tax Freedom Act (ITFA), a bill that prevents state and local taxation on Internet access. The original bill was passed in 1998 and has been extended five times. It is set to expire in September of this year, unless is extended or made permanent by this new bill, H.R. 235 Permanent Internet Tax Freedom Act (PITFA).