Many states, cities, and counties are watching their sales tax revenues decrease and their budget shortfalls grow as more and more consumers buy via the Internet, where many national retailers do not collect sales tax. Some politicians in Washington are looking to address this issue by introducing legislation that would give states the power to enforce simplified rules for collecting sales tax across state lines.
Last week, Representatives Ernest Istook (R-OK) and William Delahunt (D-MA) introduced legislation, H.R. 3184, the Streamlined Sales and Use Tax Agreement (SSUTA), in the U.S. House of Representatives that would allow states to simplify sales tax, with equal tax treatment between local merchants and remote sellers. In the coming weeks, sometime after the Senate is back in session on October 14, Senators Michael Enzi (R-WY) and Byron Dorgan (D-ND) will introduce a similar bill in the Senate.
Enzi stressed that legislation needs to be enacted so that financially strapped cities, counties, and states can recoup the taxes they are already owed but not paid.
"Currently, consumers/buyers are required to pay use taxes to states for any remote purchases that sales tax is not collected [on] and remitted by the seller at the time of purchase," Enzi told Bookselling This Week via e-mail. "Unfortunately, few buyers know about this responsibility and even fewer voluntarily fulfill it. Additionally, because this burden to remit sales or use tax is on the buyer, remote businesses, like online, catalog, and phone-order, appear to have a price advantage over local Main Street businesses.
"So, sensible legislation is needed to provide for reasonable, fair collection of sales taxes, to reduce the complexity of collection for both buyers and sellers, and to put Internet retailers on a level playing field with Main Street businesses."
As with Istook's and Delahunt's bill, the Senate legislation would look to grant authority to a national simplification agreement already made last year by 34 states and the District of Columbia, which was also called SSUTA. The states' agreement outlined a comprehensive system to simplify the states' sales tax rules and to dramatically reduce red tape for America's businesses. Since it was adopted last year, 20 states enacted legislation to change their tax laws and implement the requirements of that agreement.
"The bill would allow states who are voluntary members of the Streamlined Sales and Use Tax [Agreement] to require all sellers to collect and remit sales tax. The states, however, would only have the authority to collect if they simplify their sales and use tax system for all sales, including remote sales. This simplification is important because it would make it easier for all businesses -- especially interstate businesses -- to navigate the complex network of over 7,600 current taxing jurisdictions." Enzi noted that states that do not become members of the SSUTA are not required to make any modifications to their tax systems, but they can join SSUTA at any time.
And though some protest that collecting sales tax online would hurt the growth of the Internet, Senator Enzi stressed that the time to start collecting tax on Internet purchases has come. "Changes in consumer buying trends have reduced sales tax revenues to states, cities, and towns [that] have come to rely on this form of revenue to provide essential community services such as education, law enforcement, and fire fighters. If we don't address this revenue drain, other taxes like property and income taxes will have to be increased, which I strongly oppose."
Senator Enzi has been working with "industry players of all sizes to draft a responsible bill that addresses their concerns, as well as the concerns of local and state governments," he said. "Because no legislation is perfect right out of the chute, I think it's important to engage all of the stakeholders in the drafting and revision processes. I will continue to work with Amazon and other stakeholders as this bill moves closer to introduction and hopefully, eventual passage." --David Grogan