On Wednesday, October 15, Senator Michael Enzi (R-WY) introduced legislation (S. 1736) in the Senate that would allow states to simplify sales tax, with equal tax treatment between local merchants and remote sellers. The bill, the Streamlined Sales and Use Tax Act (SSUTA), would help states begin to recover from years of budgetary shortfalls by collecting revenue lost through catalog and Internet purchases. The bill is co-sponsored by Senator Byron Dorgan (D-ND).
"E-commerce has caused a significant change in consumer buying trends," Enzi said. "More and more people are making purchases through remote businesses such as online, catalog, and phone-order. This change has reduced sales tax revenues to states, cities, and towns that rely on this form of revenue to provide essential community services such as education, law enforcement, and fire fighting."
Enzi's legislation would streamline the country's more than 7,500 diverse sales tax jurisdictions by allowing states that become voluntary members of a national compact to require remote sellers to collect and remit sales and use taxes. The national compact was made last year by 34 states and the District of Columbia and is also called SSUTA; it outlines a comprehensive system to simplify the states' sales tax rules and to dramatically reduce red tape for America's businesses. States that do not simplify their sales and use tax system for all sales do not have the authority to collect tax on remote sales.
Furthermore, states that do not choose to become members of the compact would not be required to make any modifications to their tax systems, but would have the opportunity to join the compact and implement the simplification requirements at any time.
The legislation also contains a small business exception, which states that "no seller shall be subject to a requirement of any state to collect and remit sales and use taxes with respect to a remote sale where the seller and its affiliates collectively had gross remote taxable sales nationwide of less than $5 million in the calendar year preceding the date of such sale. No seller shall be subject to a requirement of any state to collect and remit sales and use taxes with respect to a remote sale where the seller and its affiliates collectively meet the $5 million threshold
but the seller has less than $100,000 in gross remote taxable sales nationwide."
Overall, Enzi stressed that the legislation would not increase taxes or permit duplicate taxation by different states. "This legislation does not increase taxes, create a new tax, or tax access on the Internet," he explained. "It is, however, a way to put Main Street businesses on a level playing field with Internet retailers and to provide financially strapped cities, counties, and states with much needed revenue."
In addition to Dorgan, who helped draft the legislation, 11 other senators are co-sponsors of SSUTA: Jeff Bingaman (D-NM), John Breaux (D-LA), Lincoln Chafee (R-RI), Bob Graham (D-FL), Chuck Hagel (R-NE), Kay Hutchison (R-TX), Tim Johnson (D-SD), Ben Nelson (D-NE), John Rockefeller (D-WV), Craig Thomas (R-WY), and George Voinovich (R-OH).
In related news, on Thursday October 16, California joined the Streamlined Sales Tax Project (SSTP, the coalition of states that developed the SSUTA) following Governor Gray Davis' signing last week of S.B. 157, which takes effect January 1, as reported by DM News. California is the 39th state to join the SSTP, the article noted. --David Grogan