Sales Tax Bill Introduced in Congress

I neglected to note earlier this month that on July 1, the Streamlined Sales Tax Project (SSTP) bill was introduced in Congress as H.R. 5660. Sponsored by Rep. Bill Delahunt (D-MA) with four cosponsors, the bill would permit states to force non-resident retailers to collect their state's sales tax on purchases made over the Internet or through the mail.

States cannot constitutionality do this now for two reasons. First, there is skepticism that states can cooperate to divvy up taxes on transactions that cross state lines without destroying interstate commerce. Second, and relatedly, sales taxes are numerous (over 8,000 in the U.S.), not lined up to zip codes, differing bases and definitions, and constantly changing. Making Internet and mail-order retailers comply with all 8,000 systems while brick-and-mortar retailers only deal with one is not a level playing field.

The bill sets out "minimum simplification requirements," but it's more about uniformity than simplification. States can still have oodles of different taxes and rates and differing rates for various uses, entities, and products, preferring a "we won't hold you responsible so long as you use our certified systems" model that hides the problem instead of solving it. The bill does, however, reflect the SSTP's success at reducing administrative burdens, such as by centralizing collection and uniform sourcing rules and definitions.

20 or so states are currently compliant members of the SSTP project, although few of the big states aboard. While state governments are salivating at the potential revenue gains, business is more split: brick-and-mortar retailers are generally pro (as are sellers of tax tracking services), while Internet-based entities are more negative.

One retailer who straddles that divide is rather insightful:

For Leigh Bader, CEO of 3balls.com, the issue isn't so clear. His company has a brick-and-mortar store in Massachusetts and is also one of the largest sellers on eBay. "I can see both sides of the argument," he says. "People wanted to make the Internet available to the widest possible number of consumers, so they said no to sales taxes. But that gives the brick-and-mortar store a disadvantage. I understand the states' desire to collect sales taxes on items they think they're due. But this bill would force 3balls.com to be acquainted with the tax laws in many jurisdictions. It's practically unfeasible."

More on the SSTP:


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