A few weeks ago the United States Supreme Court ruled that states may require “remote” retailers to collect and remit the sales taxes owed on purchases of goods and services subject to a state’s consumers’ sales tax. West Virginia should quickly begin requiring such retailers to collect those taxes and remit them to our state.
A “remote” seller is one that has no physical presence in a state. “Remote” sales are those made online, through the mail or over the phone.
This would not be a tax increase, as the money is already owed to West Virginia. As Republican Congressman Steve Womack of Arkansas is fond of saying, this tax is not new, it is due.
Gov. Jim Justice says that we shouldn’t require those out-of-state retailers to collect our tax because he thinks we don’t need the money. That betrays a serious misunderstanding of the issue.
While state revenue is part of the discussion, it is not the central question. Fairness to retailers is central, revenue collection is ancillary.
If I buy a shirt from a retailer in our state, that retailer is required to collect West Virginia’s consumers’ sales tax and send the money to the state. If I buy that same shirt from a retailer in California, Maine or some other state, that out-of state retailer is not required to collect the sales tax I owe. That is not fair to West Virginia retailers. Furthermore, since I owe the tax, if I buy it from an out-of-state retailer I’m required to pay the tax myself. This is unnecessarily cumbersome and therefore stupid tax policy.
If the governor thinks we have enough money to do all the things we need state government to do, we should still require these taxes to be collected, and in turn reduce taxes elsewhere by the approximate amount (conservatively estimated at $50 million) we’d collect. We would get the same amount of money in a manner that is fair to in-state retailers. For example, we could eliminate the inventory portion of the personal property tax on retailers, which if memory serves brings in about $70 million.
Collecting and remitting this money will not be an onerous burden on out-of-state retailers. The same software that tells them your address can also tell them what the tax is at that location. There are tax accounting firms that can handle the work seamlessly. And the Streamlined Sales Tax Governing Board (West Virginia is one of 24 member states) has a central registration system, making it even easier for remote sellers to obey the law.
Do we need the money? The governor trumpets increased collections in the past two years. No sensible economist would argue that we can presume, based on a two-year uptick, that the economy will be rosy for the foreseeable future.
We have an opioid crisis that is strangling our state, and it’s going to take tens of millions of dollars to fix the problem. We gave our teachers, school service workers and state employees a 5 percent raise, some of which was funded with one-time money. And the public employees’ health care plan (PEIA) was stabilized with $50 million of one-time money.
Furthermore, the teacher walkout that produced that 5 percent pay raise resulted in a half dozen other states (most of which were alongside West Virginia in the bottom tier of teacher average salary rankings) giving raises of at least twice that amount. So West Virginia, rather than climbing a few notches in national teacher salary rankings, will at best stay at 48. I believe the people of our state want West Virginia to rise in those rankings, so our teachers will want to stay.
There’s only so much money that can be found under the category of “waste, fraud and abuse.” The current leadership of the Legislature has been looking for it for four years and has found little. This is not a criticism; I know they’re serious. I was a member of the House of Delegates Finance Committee for 19 years (Vice chair for 10 years), and I looked hard for waste that entire time. Generally speaking, it can be found in the single-digit millions, but not in tens of millions, unless you think you can eliminate entire programs that have broad public support. Because of that support, those programs will most likely survive.
So if we will need more revenue (I argue we do) it would be better to get as much of it as we can by collecting owed but unpaid taxes before raising taxes.