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Nevada Internet Tax Rolls Out Quietly

By Erin Lale

Nevadans shopping online are getting a surprise in their shopping carts: sales tax. Although Governor Brian Sandoval’s office issued a statement earlier this year that the State of Nevada had reached an agreement with Amazon and other online retailers to begin collecting Nevada state sales tax, many consumers assumed the tax would only be collected by big companies like Amazon. So when shoppers check out at the websites of small businesses, many consumers are surprised they now have to pay both shipping and sales tax in the same transaction, which was not the case in Nevada before this year.

In 2010, Nevada voters defeated an internet tax initiative. Nevada State Ballot Question 3 did not use the word “internet” anywhere in its ballot language, but the people of Nevada were not fooled. The people knew it was a tax on internet sales, and they rejected it.

I helped defeat that initiative by publishing my analysis of its effect on the blog that I wrote for my 2010 campaign for Nevada State Assembly, Lale’s Magical Thinking Emporium. On Oct. 2, 2010, just before early voting started, I called it the eBay tax and wrote:

“What they want to do is make poor people forced to make ends meet by selling their used shoes on the internet buy hundreds of dollars of state sales tax permits for states they don’t even live in. Which, obviously, they can’t afford, so this avenue of getting by won’t be open to the very poor anymore. The last thing we need right now is to devise yet more government barriers to prevent people from lifting themselves up out of poverty.”

The new tax was levied by executive fiat. Gov. Sandoval has stated that the tax was already owed by businesses and that therefore this new internet tax is not a new tax. However, just two years ago the promoters of the initiative believed such a tax would require an amendment to the Nevada State Constitution. That is what the initiative process does; if the initiative had won, it would have amended the Constitution. The initiative and legislative processes could not pass an internet tax in the face of opposition by the people. Gov. Sandoval has now joined other members of the executive branch of government in asserting the power to make changes that were previously considered the domain of the legislative branch.

When the first stores appeared on the internet a generation ago, no state collected sales tax on internet sales. It was understood that net-based and bricks-and-mortar businesses had a level playing field on price because bricks-and-mortar stores charged tax while internet stores and catalogs charged shipping. Over time, most states that have a state sales tax began requiring companies based in their state to collect sales tax. Companies responded by moving their operations to states outside of but near the state with their largest customer base to avoid taxes. As more states began to tax such sales, Nevada’s status as a state that did not tax internet sales attracted catalog warehouse operations, which brought jobs here. Now that Nevada is no longer free of internet taxes, the rationale for bringing those warehouse operations here is gone. The next logical place for companies to move their warehouse operations would be one border south to Mexico. In the meantime, Nevada consumers will be paying more when they shop online.

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