The 111th Congress will soon consider legislation designed to force retailers across the nation to become tax collectors for states that have joined the Streamlined Sales Tax Project (SSTP). This legislation would mandate that out-of-state sellers collect taxes for states where they have no physical presence overturning the Supreme Courts Quill ruling that state tax systems are so complex that they represent an unreasonable burden on interstate commerce.
If Congress were to overturn Quill and mandate collection by all sellers, Congress must maintain oversight to protect small sellers from unreasonable collection burdens.
Reason 1: Tax collection burdens fall hardest on small sellers. In a study commissioned by the SSTP Governing Board, PriceWaterhouseCoopers found that for small sellers (under $1 million in annual sales), the cost of collection is nearly 17 cents on every dollar of tax collected. And that doesn’t include initial costs for programming, systems integration, and employee training.
Reason 2: The Governing Board is not capable of holding member states to any standard of simplification. By back-sliding on its promise to simplify, the SSTP Governing Board is losing its credibility as a governance mechanism. To attract new member states, the Governing Board has abandoned initial simplification promises such as a single rate per state, uniform sourcing, and elimination of sale thresholds. Moreover, when member states create replacement taxes to avoid simplification, the Governing Board looks the other way. As in previous versions of this legislation, Congress should require Minimum Simplification’ conditions, including a Congressional determination of the small business exception.
Reason 3: Only Congress can represent sellers in all states. The Governing Board represents only the governments of its member states. However, they want Congress to mandate collection by sellers in ALL states — not just in member states. There are millions of small sellers in the states that have no sales tax and in states that decide not to join SSTP. These businesses are entitled to the protection of Congress — including an adequate small seller exception — to prevent unreasonable burdens on interstate commerce.
Congress should set the SST small seller exception.The small seller exception for SST should be determined by Congress, in consultation with states and groups such as NCSL, ALEC, the Council of State Governments, the National Governorsation of Independent Business. If Congress defers to the Governing Board on the small seller exception, nobody will be safe from new burdens of being tax collectors for the states.