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"The agreement... incorporates uniform definitions of taxable online goods and services and will establish a single tax rate for each type of item."

 

 

States Vote to Streamline Collection of Internet Sales Taxes

 A coalition of lawmakers and tax collectors from more than 30 states gathered together in Chicago on November 12 to approve the final draft of an interstate agreement to "simplify" their tax laws and make it easier for budget-strapped legislators to collect sales and use taxes on Internet purchases.

The agreement, known as the Streamlined Sales Tax Project, incorporates uniform definitions of taxable online goods and services and will establish a single tax rate for each type of item.  It also lays the foundation for the states' long sought after plan to adopt an interstate compact that would allow them to reach across state lines and collect sales taxes on out-of-state purchases. 

The agreement will take effect when at least 10 participating states, representing at least 20 percent of the population, have amended their tax laws.  However, according to a 1992 U.S. Supreme Court decision, the states must then receive congressional approval before implementing their online sales tax regime that would require out-of-state retailers to collect and remit sales taxes unless the retailer has a substantial physical presence, or "Nexus," in the state. 

"We think that once these states have simplified their systems it will be appropriate for the federal government to reward that effort," said R. Bruce Johnson, commissioner of the Utah state tax commission, to the Washington Post.  However, with many outspoken opponents in the Republican-controlled Congress, the message to the states may be: "Don't hold your breath." 

The Center for Individual Freedom, which helped spearhead the campaign against Internet taxation in Congress, has dedicated a section of its website to the ongoing battle against the revenue-hungry states and brick-and-mortar retailers.  To read more on the Streamlined Sales Tax Project and other related issues, click here. 

[Posted November 14, 2002]