Utah's Silent Crackdown Could Mean More Online Taxes to Come

Last week, it was reported that Utah is making a move towards collecting sales taxes for online purchases for the first time.

While no bills have cleared the state's legislature thus far, the state's tax commission has moved to make a series of agreements with online retailers in order to close the tax gap that has been hurting the state's budget.  This could mean that Utahns across the state could be feeling an additional pinch of 4.7% on their online purchases soon if they are not already experiencing it.

Online sales tax bills have proven unpopular thus far, and lobbying by the public has successfully stopped such bills several times.  The lack of an online sales tax has thus far encouraged utilizing online retailers, a trend that has sapped the state government of nearly $200 million from its coffers.

However, the state tax commission has circumvented this legislative inaction.  Rather than wait for laws to be passed, the commission has reached out to a number of retailers in order to institute the online tax voluntarily.  The commission has nabbed a number of large retailers in this manner.  Even the country's largest online retailer, the shopping juggernaut Amazon, has acquiesced to the state's request for taxation.

At first, their decision to do so may seem odd considering the tax may erase some of the competitive advantages the retailers hold.  However, the move is actually much more astute than it first appears.  The voluntary decision to comply with the commission's request helps to curry a favorable relationship with regulators, thus deflecting potential negative attention.  Additionally, the move would likely become binding in time regardless, so complying now merely limits future costs.

What Utah's move means for consumers is that the states where online purchases remain free from sales tax are rapidly dwindling.  This change will be important for frequent online shoppers to keep in mind moving forward, as one of the benefits that currently exists for purchases made online could soon be gone, meaning more discretion will need to be exercised when bargain hunting and keeping tabs on personal finance.