It feels like Groundhog Day. The Simplified Sales Tax Project (SSTP) won’t seem to go away, despite widespread agreement that it is actually not that simple and not necessary.
(The Nov 28 issue of Forbes provides a good summary –
http://www.forbes.com/business/2007/11/28/consumers-congress-tax-biz-wash-cz_atg_1128beltway.html)
But today presents yet another opportunity for advocates and detractors to testify before the House Judiciary Subcommittee on Commercial and Administrative Law about this topic. At issue is whether 15 states who have adopted the Streamlined Sales and Use Tax Agreement have sufficiently simplified a sales tax system that the Supreme Court found to be an unreasonable burden on interstate commerce. These states are now asking Congress for a nationwide mandate to force all out-of-state retailers to collect and remit sales tax for any goods sold to residents of the “simplified” states.
SSTP Member states have always known that they could go back to the Supreme Court and attempt to prove that they have truly eliminated the unreasonable burden on interstate commerce that was found in the 1992 Quill ruling. Instead, the SSTP states chose to avoid the harsh judgment of the Court, by asking Congress to grant them the power to impose these unreasonable burdens on out-of-state businesses.
Despite 6 years of effort, the actual simplification achieved by the SSTP is not sufficient enough to show Congress that it should abandon its role in protecting interstate commerce. In fact, the SSTP has shown that simplification has become just a slogan. Simplification is proving to be much more difficult than anyone imagined.
The SSTP Governing Board is now working on a new dual-sourcing scheme to accommodate both origin and destination based taxes at the same time despite being two steps removed from the original simplification vision of one-rate-per-state. Not to mention that the cost to businesses that would be forced to implement new systems and to collect, file and remit the Streamlined Sales Tax could be substantial, a fact that SSTP proponents would prefer to avoid.
Further, the holiday shopping season is making tax officials anxious to collect any unpaid sales & use tax on purchases made from out-of-state catalogs and websites. But more and more online commerce is done by multi-channel retailers who already collect sales tax for all the states where they have stores and facilities. According to a recent survey, more than half of the sales taxes owed by consumers on the online purchases were being collected anyway.
A more reasonable approach would be to amend HR 3396 to give Member States some of the authority they seek, but stop short of a national mandate on sellers in every state. Congress could require collection not by all sellers but by sellers in the other SSTP Member States – essentially approving a voluntary multi-state tax compact. That would at least give Member States a chance to prove they can develop and sustain true simplification.
Steve DelBianco
executive director, NetChoice