Posted on 12/10/2003 12:26:07 PM PST by Valpal1
WASHINGTON -- Online shoppers in more than 20 states may soon pay sales taxes on their purchases if Congress passes pending legislation.
Under the proposed Streamlined Sales and Use Tax Act, out-of-state merchants and online vendors must collect sales tax on goods shipped to some states. The key issue is whether buyers live in a state that has adopted the interstate sales and use tax program called the Streamlined Sales and Use Tax Agreement (see chart for status of states).
Currently, 45 states and the District of Columbia impose sales and use taxes on purchases. Of these, 35 states have signed onto the interstate tax program, which streamlines more than 7500 diverse sales tax laws in state and local jurisdictions. In 20 of these 35 states, the state legislatures have ratified the program and are ready to start taxing Internet purchases.
This measure would not be affected by a ban on taxes unique to the Internet, also being considered by Congress. That's because the taxes involved are not new fees, the bill's supporters say--they're just not being collected now.
"The bill only enforces the collection of taxes that are already due," says Bill Duncan, a legislative aide to Rep. Ernest Istook Jr. (R-Oklahoma), a House sponsor.
Temporary Respite The program is now voluntary, however, so not all merchants collect the taxes. Some, like Wal-Mart and Target, already collect sales taxes for online purchases in the 20 interstate tax program states, according to Duncan.
Enactment of the House bill would force merchants that ship goods into the 20 participating states to collect taxes on purchases.
The ten states that have not signed on are moving cautiously toward adoption, while continuing to study and analyze the issue. California, which has a complicated sales and use tax system, is participating more actively in the initiative after sitting on the sideline for months.
"To have us show up [at the meetings], participate, and engage is a big deal," says Carole Migden, chair of California's Board of Equalization, which administers the state's tax programs. Still, she says, "big revenue-generating states such as California and New York conceptually like the initiative, but aren't ready to jump in."
No one knows whether any of the ten holdout states will ratify the interstate taxing system. David Steil, representing the National Conference of State Legislatures, the lobbying arm of state legislative bodies, says he doesn't expect all of them to adopt the interstate system.
"I suspect some won't come on board," he says. "If they do nothing, they'll lose sales revenue."
Congressional aide Duncan adds, "There are political forces in every state that drive the train. Just because the tax commissioner recommends the Agreement, does not mean the legislature will follow suit."
Who'll Pay The pending bill gives states the clout to collect sales and use taxes from out-of-state merchants who have no stores, warehouses, or other physical facilities in the state where the sale occurs. In 1992, the U.S. Supreme Court ruled that states can't force out-of-state vendors to collect sales taxes for them, largely because the various sales and use tax systems are so complex. The court declared that it's too hard for retailers to keep track of all those tax systems.
For example, a Twinkie might be defined as nontaxable food in one state, but as taxable candy in another. Often, sales tax regulations differ even among counties or cities within a state.
Because the proposed Streamlined Sales and Use Tax Act streamlines procedure, it reduces the burden on retailers, which can then be forced to charge taxes, say those familiar with the bill.
"This bill provides a uniform definition of what is taxable," Duncan says.
To protect small businesses, the bill exempts merchants with annual sales less than $5 million from collecting sales and use taxes from their customers. "This would be an excessive burden on small retailers," says Craig Shearman, a spokesperson for the National Retail Federation.
Online mass retailer Amazon.com opposes the bill, contending that it gives smaller online retailers an unfair advantage.
"The bill creates a large loophole for small sellers," says Bill Curry, an Amazon.com spokesperson. "Clearly, anyone with $4,999,999.99 worth of out-of-state sales each year is not small," he adds. "It's a threshold that invites abuse."
Next Steps The bill, introduced in the House last Thursday, will be presented to the Senate later this week. Support is strong, says Duncan, noting that a similar measure was passed by the House in 2000 as part of the Internet Tax Moratorium, but did not come to a vote in the Senate.
Congress could vote on the bill by the end of this year or in early 2004, Duncan says.
The bill's supporters include state and local governments, which have experienced revenue shortfalls in recent years. Those jurisdictions are estimated to have lost as much as $13 billion in uncollected sales taxes from online sales in 2002, according to a study by the Business Research Center at the University of Tennessee.
Other endorsements come from retail trade groups such as the International Council of Shopping Centers and the National Retail Federation, which have long complained that online competitors enjoy a competitive advantage because they need not charge sales taxes. The bill levels the playing field for retailers, the brick-and-mortar trade groups say--and not just small, independent storefront merchants will benefit.
For example, Gateway supports the bill because it creates more equitable competition with key rival Dell. Dell does not collect taxes from its online customers. But Gateway, with stores in most states, must charge sales taxes when shipping to states that impose sales taxes.
A University of California-Los Angeles study released earlier this year found that nearly half of online buyers said they would buy fewer goods online if sales taxes were applied to their purchases.
Enacted/In Progress Arkansas Alabama Iowa Arizona Indiana California Kansas Connecticut Kentucky District of Columbia Minnesota Florida Nebraska Hawaii Nevada Illinois North Carolina Louisiana North Dakota Maine Ohio Maryland Oklahoma Massachusetts South Dakota Michigan Tennessee Mississippi Texas Missouri Utah New Jersey Vermont New York Washington Pennsylvania West Virginia Rhode Island Wyoming South Carolina Virginia Wisconsin
Not Participating/No Sales Tax Colorado Alaska Georgia Delaware Idaho Montana New Mexico Oregon New Hampshire
Online tobacco purchasers have been under attack even more so than any one else - we've been working on this for a while.
No Tax or Duty shall be laid on Articles exported from any State.
Except tobacco products (1954 Jenkins Act)
EXACTLY
No where do I see this will impact the catlogs, unless they have an online presence. If that is the case, they will just contribute to further dumps in the e-commerce business by dumping their online stores.
DUMB and DUMBER
That said, I'm totally against sales tax for internet purchases.
Correct. And absolutely irrelevant. This is a state issue, not a federal issue -- section IX refers to the federal government. The fact is that these taxes have always been required (look up the term "use tax"), but because of enforcement issues, they usually go unpaid.
Or, as Al Gore would say, they has been "no controlling legal authority". The SSTI simply becomes that "controlling legal authority".
Prehaps it's time for us to start sticking ours hand into their personal wallets.
Making it an "agreement" among the participating states is one thing. Enshrining it as "law" enacted by the U.S. Congress is quite another.
Its a cheap attempt to find a loophole in Constitution prohibitions against state "export duties" and will eventually be struck down (that's why the states have "use taxes" for this sort of situation, they can't tax sales in another state failing the physical presence or nexus tests).
Not the first time this kind of thing has been attempted by Congress.
You're confusing the issues.
The Constitution certainly does prohibit Congress from collecting export taxes from the states, or enforcing those collections, which is exactly what they're attempting to do here.
State "use taxes" are invoked for precisely the reason that one state cannot itself collect sales tax from commerce in another state. That fails the nexus and physical presence tests. So they invoke a "use tax", which if you think about the linguistics, is called that precisely because it cannot be called a "sales tax" that regulates interstate commerce. States do not have that power.
But in this case, neither does Congress, and calling it "an agreement among the states" doesn't make the case any stronger. Federal law cannot be used as an enforcement mechanism for actions that egregiously violate the Constitution.
This will be struck down by the USSC, eventually.
They are pulling a fast one here precisely because SCOTUS has hinted that this fast one is the one they are willing to wink at. Once again, taxpayers and small business is getting the shaft.
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