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Posted on 11/13/2002 4:03:02 PM PST by avg_freeper
By Reuters
November 12, 2002, 5:35 PM PT
More than 30 U.S. states approved a pact Tuesday that represents a major step toward creating a system to tax items sold on the Internet.
"This is a 21st century system that will dramatically improve the morass that currently exists," Utah Gov. Michael Leavitt said in a statement after 32 states approved model legislation snipping reams of red tape that has kept state and local governments from collecting tax on Internet sales.
The agreement--representing years of painstaking work by state delegates--sets out unified definitions of products from orange juice to salted peanuts that previously varied from area to area and created bureaucratic nightmares for businesses.
It would also require participating state and local governments to have only one statewide tax rate for each type of product from 2006. Currently different cities and states can set their own tax rate on products.
The Direct Marketing Association, a trade group whose members include Internet retailers, charged that the pact was flawed and could push the number of tax rates to more than 15,000 from 7,500 rather than cutting them to some 200 as the project members claim.
But even backers of the effort, known as the Streamlined Sales Tax Project, say the next phase of marshaling the support of state lawmakers susceptible to pleadings by constituents for special treatment could be an uphill fight.
"This is the end of the beginning," said Frank Shafroth, head of state and federal relations at the National Governors Association. "The next step is doing the heavy lifting and getting the state legislatures to actually enact legislation."
The plan has sweeping implications for commerce on the Internet, where state and local governments are now powerless to require collection and remittance of sales taxes on transactions by residents with out-of-state retailers.
Recognizing the administrative burden for catalog and other "remote" retailers of complying with the country's estimated 7,500 sales tax regimes, the Supreme Court ruled in 1992 that such vendors could not be forced to collect sales tax if they did not have a physical presence in the consumer's home state.
But as Internet shopping has boomed, the ruling has hit state coffers hard, costing them some $13 billion in sales tax revenue, by some estimates, not collected from online sales.
They may lose another $45.2 billion in revenue in 2006 and $54.8 billion in 2011, according to projections from the Institute for State Studies, a nonprofit group based in Salt Lake City that analyzes technology policy issues.
At the same time, states are grappling with falling collections of taxes overall due to the anemic national economy.
Members of the Streamlined Sales Tax Project hope that Congress, already sympathetic to their tales of fiscal woe, will be more inclined to pass laws requiring Internet vendors to collect and remit sales tax once the system is simplified.
"Hopefully you're creating a far more efficient system," Shafroth said. "If you are a seller, not having to worry about the definition of salted peanuts or what the rounding rule is in Texarkana--it's a big deal."
Project advocates say requiring Internet retailers to collect sales taxes would also level the competitive playing field for traditional bricks-and-mortar retailers who currently comply with sales tax regimes.
The project still has work to do, however, since at least 10 states must adopt the new, streamlined code approved on Tuesday before it can come into effect. Even then, compliance is optional for Internet vendors unless and until Congress takes action.
Story Copyright © 2002 Reuters Limited. All rights reserved.
CUT HIM OPEN AND GET THE REST OF THEM OUT!
There's no morass, jackass! (I'm addressing that to the fellow in the article, not you avg.) Taxes are the morass! Time for commoners with pitchforks to start kicking in doors at the state legislatures. If they scared them in Tennessee wee can scare them everywhere else.
A gander that gives golden eggs would be worth his weight in platinum!
--Boris
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