States Vote to Proceed With Internet Sales Tax

Tax officials and legislators from 31 states and the District of Columbia met in Chicago on Tuesday to vote on a plan to simplify their respective tax laws in order to position themselves to collect sales tax on Internet sales.

The state officials voted unanimously to accept the plan, called the Streamlined Sales Tax Project. The next step in the controversial plan will be to ask Congress to mandate an online sales tax collection program. Should such legislation pass, the program would require mandatory participation among all states if as few as 10 states amend their laws to implement the program.

If the Streamlined Sales Tax Project is enacted, states would be required to simplify tax reporting requirements and would agree to charge a single statewide tax rate for various types of products. In addition the current sales taxing jurisdictions throughout the country, which number approximately 7,500, would be reduced to 200, thus significantly easing the reporting burden on retailers. States feel the program will be attractive to retailers who will be eligible to share in a portion of the sales tax proceeds.

Those who object to the program point to the additional paperwork burden for retailers, the ease with which retailers and customers could cheat the system, the cost of implementing a method of collection and tax payment, the fact that such a sales tax would encourage Internet shoppers to make purchases from non-U.S. vendors, and the unconstitutionality of such a program which violates the prohibition on state governments from taxing and regulating interstate commerce.

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