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Bill taxes out-of-state E-commerce firms more accurately - KXLF.com | Continuous News | Butte, Montana

Bill taxes out-of-state E-commerce firms more accurately

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State Revenue Director Mike Kadas State Revenue Director Mike Kadas
HELENA -

A bill designed to tax more accurately the profits of out-of-state firms that sell into Montana – particularly via the Internet, or other forms of electronic commerce – passed the Senate Wednesday and is on its way to Gov. Steve Bullock’s desk.

House Bill 511, which applies to multi-state or multinational companies, tracks income from services sold into the state.

State Revenue Director Mike Kadas told MTN News that it will enable the state to accurately track the Montana income generated by e-commerce giants like Netflix or Amazon – and apply Montana corporate taxes to that income.

“We’re trying to reflect how the economy has changed,” he said. “And e-commerce, in particular, has grown significantly – to the detriment of a lot of local businesses. So, what this change does is try to capture, as income from corporations, some of that e-commerce.”

It’s estimated that the change will generate an additional $1.5 million a year in corporate income-tax revenue.

Republican state Rep. Rob Cook of Conrad, the sponsor of the bill, said it passed with bipartisan support because “it’s the right thing to do.”

“It’s shifting taxes from bricks-and-mortar, Main Street Montana businesses to out-of-state corporations,” he said. “It’s absolutely about tax equity for Montana businesses.”

The bill passed the House 71-29 late last month and the Senate 32-18 on Wednesday. All of the chambers’ Democrats supported it, along with some Republicans.

When computing a multi-state company’s profits for tax purposes, Montana looks at its payroll, property and sales in Montana, to come up with a fractional multiplier.

HB511 changes the definition of how sales are calculated, within that formula, capturing the amount at the point of sale. So, if Netflix has 50,000 subscribers at $9 a month in Montana, its income is $450,000 a month.

Under the current calculations, that amount might not even show up, Kadas said.

“Now that that’s a bigger part of the economy, we want to make sure that shows up,” he said.

“All of that is competing with the local businesses, and putting (some of them) out of business, Kadas continued. “We’re trying to find a broader, fairer base on which to compute corporate income taxes.”

About Mike Dennison

MTN Chief Political Reporter Mike Dennison joined MTN News in August 2015 after a 23-year career as a newspaper reporter covering Montana politics and state government. While some may believe that politics are boring, Mike firmly believes that's not the case if you tell the story with pizzazz and let people know why the story is important.
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