Political and economic climate improving for Streamlined Sales Tax Project
A bill that would implement the Streamlined Sales Tax Project (SSTP) nationwide may be reintroduced in Congress later this year. Detailed provisions of the bill are still being worked on by interested groups. "Passage of a federal bill is becoming more likely because of political and technological developments," says Daniel Schibley, JD, Senior State Tax Analyst at CCH, who spoke with AccountingWEB. "States have an economic incentive for supporting the bill, and the fact that Democrats are in the majority in Congress improves the chances of passage. And the technology supporting administration and collection has greatly improved."
The bill would overturn Quill vs. North Dakota, (Quill) a 1992 Supreme Court case that concluded states can only require retailers to collect state taxes in territories where they have offices or stores. In its decision, the Court granted Congress the right to overrule their decision.
The incentives for states to adopt the SSTP Agreement are becoming more compelling, Schibley says. "The overriding goal of the Streamlined Sales Tax Project is to achieve greater uniformity and simplification in sales tax in areas such as definitions and administration. Supporters believe that technological advances can ease the administrative burden of compliance on the state and local level, and state legislatures foot the bill for the software.
"The SSTP also has the goal of limiting, or eliminating entirely, audits for taxpayers that use certified technology collection models. Instead, at some time in the future, the certified provider and systems would be audited to assure accuracy and compliance. The rules that would achieve this are still being developed."
Currently, sellers who use the certified sales tax administration software are either not audited or have limited scope audits. Large multi-state businesses can request a joint audit from all the states instead of being audited by each state.
More states are expected to join the 23 that are currently members in the project in the coming months. Companies are given a one-year tax amnesty as an incentive to join the program. "But once they have joined, they have to agree to continue," Schibley says.
"Some large states like New York and California are likely to wait for federal action, because these states would have to significantly change their laws to achieve what is now only voluntary compliance," Schibley says. "Many of the states that are already members had less complex systems. Once federal legislation is enacted and the system is mandatory, there will be a much greater incentive for California and New York to undertake the significant reform the SST would require."
Senator Mike Enzi (R-WY) and Rep. William Delahunt (D-MA), who co-sponsored an earlier version of the federal bill, The Sales Tax Fairness and Simplification Act, may sponsor the bill again. When he introduced the bill in May 2007 Enzi said that the law would "level the playing field for all in-store, catalog, and online retailers so each has the same sales tax responsibilities," cnsnews.com reported. "Simply put, if Congress continues to allow remote sales taxes to go uncollected and electronic commerce continues to grow as predicted, other taxes, such as income or property taxes, will have to be increased to offset the lost revenue to state and local governments. I want to avoid that."
Opposition to the SSTP from online retailers has diminished. "Amazon supports the SSTP but is not volunteering to collect," Schibley says. "It's awaiting federal legislation. eBay has decided to remain neutral this time around. The Big 4 accounting firms are observers but, given the diversity of their clients, are less active than some individual business taxpayers."
Opposition from the Tax Foundation has been fairly muted. Joseph Henchman, Tax Counsel & Director of State Projects for the Foundation, testified before the Maryland state legislature in February about Maryland's participation in the SSTP. Henchman does not think that the goals of simplicity and uniformity will be accomplished in the near term, in part because he thinks that there must be an alternative to "the physical presence standard that provides certainty and prevents multiple taxation."
"Maryland and other states considering involvement with the Streamlined Sales Tax Project (SSTP) should be fully informed about both the positives and negatives of the project," he said. "The effort has its merits, but it also neither a source of free money nor non-controversial."
Andrew Moylan, director of government affairs for the National Taxpayers Union last week took an unequivocal stance against the introduction of a federal bill to implement the SSTP. "It is unfathomable that lawmakers, in good conscience, would place yet another tax burden on American families given our current economic climate. Passage of SSTP legislation would shovel more money into the coffers of states that don't deserve it, while resulting in even more economic pain for hard-working taxpayers who have suffered enough."