Markel Tester tour

Deanna Harmon sews zippers as Red Oxx partner Jim Markel meets with U.S. Senator Jon Tester to talk about internet sales taxes that would hinder online sales for the Billings manufacturer.

Sen. Jon Tester spent the morning touring Red Oxx, the Billings-based travel gear company, ready to talk taxes. 

But what caught Tester's attention after arriving at the Red Oxx company store Friday morning was the vintage Yellowstone National Park service van parked out back.

"Does it run?" Tester asked.  

"We drive it every day," said Jim Markel, one of the Red Oxx owners. 

Markel bought the van at auction years ago and restored it almost to its natural state, modifying it with disc brakes and an electric starter. Tester happily examined the van inside and out, and talked specs with Markel. 

After a few minutes, they returned to business. 

Red Oxx launched here in 1986. Its main store is just two blocks from its factory floor, where all its products are constructed and stitched together by Billings workers. The company, through its online store, sells its bags and gear in all 50 states and in 20 countries. 

That made it the perfect place for Tester to tout his new anti-online tax bill, which would reverse a June ruling by the U.S. Supreme Court.

The Court's decision overturned an earlier precedent that had barred states from collecting sales tax from online companies that had no physical presence in the state where its goods were sold. The Court's reversal now gives states the power to collect sales tax for online purchases regardless of where the online companies are located.

Simply put, the Court's new ruling means Red Oxx products sold online in Maine, for example, would be subject to Maine sales tax. In the past that wasn't the case because Red Oxx has no stores in Maine.

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Tester's bill, the Stop Taxing Our Potential, or STOP Act, would return online sales tax requirements to what they were before the Court's ruling. 

As Markel led Tester through the store and walked him around the factory, the two talked about the importance of giving local businesses the space to grow and thrive. Markel is frustrated by the Supreme Court's decision and believes requiring his company to pay sales taxes for online transactions in all 50 states will severely hamper business. 

Every state, and in some cases, individual cities, have their own sales tax codes and individual items often are subject to different tax rates. Markel pointed to Missoula-made bars of soap he sells in his stores. Technically they're hygiene products, and some states don't collect sales tax on them, he said. 

"It's so complicated, and it's not a simple software solution," he said. 

The requirements from the Supreme Court's ruling compound the problem for states like Montana that have no sales tax, Tester said. 

"It's a whole new infrastructure" these states would have to build, he said. 

Those other states — Delaware, Oregon and New Hampshire — have all signed on to Tester's bill, which he acknowledges will be a tough sell in Washington.

Brick-and-mortar stores have long fought to have online businesses included in sales tax requirements, arguing it presents an unfair advantage to online retailers to keep them exempt. 

"We've got to really work this," Tester said. "It's going to be a tough lift."

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