One of the most important bills we have considered this past week is HB 220 – “Retail Fairness Act”.
This bill has been misunderstood by some and unfairly criticized I would like to give you my perspective and explanation.
The bill does institute a very narrowly focused seven percent corporate income tax. But before everyone gets upset because this bill mentions a corporate income tax, let me explain.
The tax will only apply to three specific classes of retail businesses and only to companies with over 100 shareholders. This tax will have no impact on Wyoming individuals and businesses. The purpose of this bill is to recapture for Wyoming some of the income tax that Wyoming residents are currently paying to other states through large nationwide companies.
It is important to understand that corporate income taxes are very different from sales taxes. Sales taxes are paid by the purchaser at the time and location of the retail purchase as a direct percentage of the retail sale amount. All other taxes are part of the large retailer’s cost of doing business. When a nationwide retailer calculates their costs, they include the taxes paid in all of the states in which they operate. But their pricing is the same in every state.
For example, in addition to property tax Washington has a gross receipts tax. Nebraska imposes property tax and a 7.8 percent corporate income tax. Wyoming has only a modest property tax. Yet a TV that costs $599 in a Walmart store in Seattle, Washington will cost the exact same $599 in a Walmart store in Lincoln, Neb., and in Evanston.
Uniformity of pricing across the nation by national retailers means that every customer pays their share of the company expenses, including the company’s state and federal income tax expense, property tax, gross receipts tax etc. Wyoming citizens pay their proportionate share of all these taxes to build roads in Arkansas or pay teachers in New Jersey.
There’s nothing underhanded about the pricing policies of national retailers, but it does create an imbalance that only government can rectify. Our citizens are paying taxes they cannot see and didn’t approve. It is our job as representatives to know and fix these things, and hopefully get some of the money back.
This bill does that. It is estimated that this bill will generate about $45 million per year. This added revenue is critical in reducing our deficit. This bill still has a long way to go before it is enacted. But a proposal that generates that kind of revenue without imposing any added tax burden on the citizens of our state, is great idea.