Say you buy something online. North Dakota currently doesn’t require online retailers to pay sales tax, so you pay a little less.
But there is something called a “use tax,” which is 5 percent on your purchase, in lieu of a sales tax.
The only problem is, you have to volunteer that payment, and there aren’t really any repercussions if you don’t.
So, would you pay it?
“No, why would I do that?” answered Bismarck resident Robb Vedvick.
That’s a problem state tax commissioner Ryan Rauschenberger is trying to solve.
“The individual use tax really is an honor system. The way it is, if you bring something back from another state that doesn’t have sales tax, technically you have tax owed on it,” said Rauschenberger.
Actually, paying that use tax is...taxing.
I recently purchased the book ‘Bart Simpson’s Guide to Life’ on Amazon, and I want to pay use tax on it.
It took 38 Minutes, six browsers tabs, four google searches and an two calls to the tax commissioner’s office to find the form.
Seventeen pages later, I wished Bart Simpson had a guide to taxes.
There is an easier way, just require online retailers to pay sales tax.
“If you pay a sales tax, you don’t owe use tax. If you pay a use tax, you don’t owe sales tax. They never double up,” explained Rauschenberger.
But North Dakota can’t force out of state online retailers to pay up, because of Quill Vs. North Dakota.
That was a 1992 Supreme Court decision made well before the dawn of the Internet.
The case involved a mail-order catalog company that didn’t have a brick and mortar presence in the state. The court ruled they were exempt from paying sales tax, since they didn’t have a physical presence.
But, Internet sales began to take over, with that ruling still in place.
Now our neighbors to south are leading a charge to overturn Quill.
“South Dakota has brought a new case to the Supreme Court, which the Supreme Court is deciding right now whether or not they will take, asking to overturn Quill,” said Michael Mazerov, a tax expert at the Center on Budget and Policy Priorities.
Rauchenberger estimates the state loses upwards of $35 million a year in revenue to out of state retailers.
If Quill is overturned, the state would get back an estimated $35 million in lost revenue, and we would no longer have to worry about the use tax.