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Collecting taxes on online sales a proper step for West Virginia

October 12, 2018

It’s not quite clear what brought about a change of heart in Gov. Jim Justice’s administration regarding the collection of sales tax on internet purchases in West Virginia, but it was the correct move.

The West Virginia Tax Department has notified most out-of-state retailers that they must begin collecting and remitting state and city sales taxes on online sales to Mountain State residents beginning Jan. 1. The order will change the rules for out-of-state retailers who are now exempt from collecting state and municipal sales taxes because they do not have a physical presence in the state.

Starting next year, most of those companies will have to collect and submit those taxes to the state on purchases delivered into the state, according to a report by the Charleston Gazette-Mail. The door for such a requirement was opened in June when a U.S. Supreme Court ruling overturned a 1992 court precedent limiting states’ ability to collect sales taxes on many online purchases because the retailers didn’t have a presence — stores, warehouses, offices — in a given state.

When that ruling came down, Justice quickly issued a statement saying his administration had no plans to start requiring the taxes be collected.

“When I took office and our state was struggling financially, at that desperate time, I might have considered supporting legislation to enforce West Virginia sales tax on out-of-state transactions. However, now I do not support adding additional taxes on our people in this manner,” Justice said then. “With our state’s growing economy, I don’t want to reach into West Virginians’ pockets when we don’t need to.”

Apparently, the governor has changed his mind.

The policy change is proper for numerous reasons. One is that paying the taxes is the law in West Virginia, as is the requirement that retailers collect the taxes on online purchases. West Virginia taxpayers who have made online purchases were supposed to declare the purchases on their personal income tax returns and calculate how much they owed in cases where the retailers didn’t collect the tax. Of course, not many taxpayers did so. And the Supreme Court ruling this summer certainly entitled the state to enforce the tax collection requirement on out-of-state retailers.

Another plus is that collection of the tax will help state government as it continues to dig out of significant budget problems in recent years. Some have estimated that the newly enforced requirement can generate $50 million or more annually in revenue.

Perhaps the most compelling reason, however, is that requiring online retailers to charge consumers the sales taxes helps level the playing field for brick-and-mortar stores. Those stores, many of them locally owned, had no choice but to collect and pay the sales taxes to the state, thus facing a competitive disadvantage on price compared with online retailers who did not charge consumers the tax. The state has a vested interest in keeping local businesses healthy.

Treating them fairly in regard to requirements for collecting taxes is an important part of that.

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