Online retail tax fight heats up on Arizona returns

March 05, 2012

If you live in Arizona, you better start saving your receipts. A new line on the state's tax return is asking people how much shopping they've done out of state. The idea was to recoup millions in lost revenue from online retailers. But as Peter O'Dowd reports, the law may be short-lived. 

PETER O’DOWD: Every tax season is different. But this year, Line 30 of Arizona's tax form has caught people like Linda Young off guard. 

LINDA YOUNG: It was a surprise to me, so I'm sure it would be a surprise to a lot of people.

O’DOWD: Young is a veteran tax preparer. She says she didn't notice the reporting requirement until I asked her about it.

YOUNG: How many people are committed enough to keep track of catalogue purchases and whether they paid taxes on them or not. I don't think realistic at all.

O'DOWD: Realistic or not, it is the law. In fact, it has been for more than 50 years. But 2012 is the first year it's showed up on tax forms. Across the state, tax preparers say their clients have had to either go back and search their credit card receipts, or simply guess how much they've spent. The state is asking shoppers to voluntarily pay less than 7 percent on their purchases out of state. Matt Heinz is a democratic lawmaker, who says making a good-faith effort to comply helps the little guy.

MATT HEINZ: It's on the honor system, basically, to help even the playing field for those mom and pop businesses -- the brick and mortar businesses -- that are trying to compete against larger out of state corporations.

O'DOWD: Across the country states are grappling with ways to collect sales tax from online retailers like Amazon. Researchers at the University of Tennessee say uncollected sales tax from these businesses costs all local governments billions of dollars a year. But for Debbie Lesko, Line 30 is not a solution good solution for Arizona. 

DEBBIE LESKO: Let's just get rid of it.

O’DOWD: Lesko is a Republican who is sponsoring a new bill that would eliminate Arizona's use-tax altogether. 

LESKO: Cause they're making criminals out of people who don't even know they should be doing this, and it's really burdensome.

O’DOWD: Lesko says a there's a better law pending in Congress that would give all states a framework to collect revenue from retailers outside their borders.

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