On Saturday, October 1, the Streamlined Sales and Use Tax Agreement (SSUTA), which makes it easier for online and other retailers that do business in multiple states to calculate, collect, and remit existing use tax, will become effective in 13 states: Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, Oklahoma, North Dakota, South Dakota, and West Virginia. Currently, there are five states that plan to implement SSUTA within the next two years: Arkansas, Ohio, Tennessee, Utah, and Wyoming.
Implemented by the Streamline Sales Tax Project (a coalition of participating state governments), SSUTA outlines a comprehensive system to simplify the states' sales tax rules and to dramatically reduce red tape for America's businesses. The agreement covers all sales, regardless of how they occur. Retailers voluntarily participating in SSUTA are required to collect and remit sales tax for the 13 full member states, but can pick and choose from the remaining five states.
While SSUTA is voluntary, the states implementing SSUTA hope its enactment may entice chain retailers with a prominent online presence to begin collecting sales tax before Congress enacts legislation, because SSUTA provides tax amnesty.
Senator Michael Enzi (R-WY) is expected to reintroduce Streamlined Sales and Use Tax Act (SSUTA) legislation during this session of Congress. In July, Neal Osten, federal affairs counsel for the National Conference of State Legislatures, noted that retailers with significant remote sales may not wait until federal SSUTA legislation is passed. "[Because SSUTA provides tax amnesty,] it would mean that instead of a future court determining that a seller indeed should ... pay the state for the sales taxes they should have been collecting -- plus interest and penalties -- the retailer, by volunteering to collect under the agreement, has no past liability to worry about," he said.
This is significant considering that on May 31, 2005, the California First District Court of Appeals affirmed a California Board of Equalization (BOE) recommendation that Borders Online LLC had nexus in California and owed back use tax because Borders Books & Music, Inc. accepted returns of Borders Online purchases.
"The Borders case in California will probably help some retailers who have similar nexus issues to volunteer to collect under the agreement," said Osten. "Until Congress and the Administration enacts federal legislation giving states collection authority, one of the enticements in the agreement is amnesty for past failure to collect sales and use taxes.... However, once Congress enacts the federal legislation, the amnesty provisions of the agreement are void. So if a retailer decides to wait until Congress forces it to collect and then the state determines that the retailer did have nexus for past collections, the state can legally move against the retailer for back taxes, interest, and penalties. Bottom line, sellers should volunteer to collect before Congress acts."
For more information about SSUTA, go to Streamlined Sales Tax Project website.