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In the past year, in both the U.S. House of Representatives and the Senate, bills have been introduced that would allow states to simplify sales tax regulations and give states the authority to require remote sellers to collect and remit sales and use taxes. It is expected that the bills would help states begin to recover from years of budgetary shortfalls by collecting revenue lost through catalog and Internet purchases. Now, with Congress in recess and not scheduled to return until January 20, 2004, supporters of the streamlined sales tax program will have to wait until next year before the issue is tackled once again.
In late September, Representatives Ernest Istook (R-OK) and William Delahunt (D-MA) introduced the Streamlined Sales and Use Tax Agreement (SSUTA, H.R. 3184) in the House, legislation which grants authority to a national simplification agreement already made last year by 34 states and the District of Columbia, called the Streamlined Sales and Use Tax Project (SSTP). Two week later, Senator Michael Enzi (R-WY) introduced similar legislation, S. 1736, the Streamlined Sales and Use Tax Act (SSUTA), in the Senate.
"This bill would allow states who are voluntary members of the [SSTP] to require all sellers to collect and remit sales tax," Enzi told BTW in October. "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.
"Our proposal is not an attempt to mandate an increase in state sales taxes, but rather an attempt to encourage states to reduce the complexity of their taxing systems, thereby reducing the burden of tax compliance on all sellers. States who do not become members of the SSTP are not required to make any modifications to their tax systems. They would, however, have the opportunity at any time to join the SSTP and implement the simplification requirements."
Both bills contain a small business exception, which exempts sellers that have less than "$5 million [in gross remote taxable sales nationwide] 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."
H.R. 3184 was referred to the Subcommittee on Commercial and Administrative Law and S. 1736 was referred to the Finance Committee.
However, according to the Bureau of National Affairs (NBA), the issue is complicated by the fact that some senators are seeking to revive an Internet tax ban that expired November 1, which bans Internet access taxes and new, multiple, and discriminatory taxes on electronic commerce.
Senator George Allen (R-VA) had introduced a bill in early 2003, S. 150, seeking to make the moratorium permanent. However, after failing to produce a vote on the bill, attempts were made to attach a short extension to a House omnibus spending package, as reported by NBA, but the extension was rejected on November 25. Allen told NBA that he thought some senators would try to tie the moratorium bill to S. 1736 when Congress returns in January, and said he would fight these efforts because SSUTA is a separate issue."
NBA noted that Finance Chairman Charles Grassley (R-IA) could very well support a combined approach to the moratorium and the sales tax questions since Iowa relies heavily on sales taxes for revenue.
Regardless of the actions taken by Congress in the future, the American Booksellers Association continues to believe that, under current tax laws, states already have the authority to collect sales tax from retailers with nexus in their states. Without question, SSTP has spurred some confusion regarding the issue of online sales tax collection, both in the media and among a number of state taxing authorities.
In a letter dated May 22, 2003, sent on behalf of ABA member bookstores, ABA President Ann Christophersen urged state governors and other elected officials in the 45 states that charge sales tax to immediately take steps to enforce state tax laws fairly and uniformly. In her letter, Christophersen stressed, "We believe that the laws in your state need no clarification -- online retailers that have an indisputable physical 'bricks-and-mortar' presence in your state are no different than any other business within your state. When any business, or any online business that has a physical counterpart within the state, makes a sale to a customer within that state, they are required by law to collect sales tax…. As such, your state can enforce your existing tax laws with regards to online retailers now -- without passing a new law or changing an existing one."