State Delegates Approve Tax Collection Proposal

Jan 01, 2003 10:30 PM  By

Simplification of tax collection sounds like a good idea. But some direct marketers fear that the November approval of a plan to simplify the collection of sales taxes could soon require catalogers to collect and remit use taxes.

Approved by representatives from 33 states and the District of Columbia, the plan was the brainchild of the Streamlined Sales Tax Implementing States (SSTIS), a group formed to replace the multitude of tax laws imposed by local jurisdictions with simpler, more uniform taxes. The group’s next step is to persuade state legislatures to make the agreement law in their jurisdictions. Currently the proposal is strictly voluntary for states and companies alike.

While the agreement simplifies tax collection and remission for retailers with stores in multiple states, the SSTIS also hopes to collect use taxes from catalogers, online marketers, and other remote sellers. The Supreme Court has ruled, most notably in Quill v. North Dakota, that companies are not required to remit local sales taxes to jurisdictions in which they have no physical presence.

But one basis of that ruling, says Direct Marketing Association spokesperson Lou Mastria, is that “there’s too much burden on the merchant to know all the tax collecting regimes out there.” By simplifying the tax codes, the SSTIS is apparently hoping to eventually have the ruling reinterpreted or overturned.

What’s more, the federal Internet tax moratorium, which expires in November, bans multiple and “discriminatory” taxation on Web-based transactions. SSTIS participants hope that a simplified tax code will override concerns about discriminatory taxation.

The SSTIS wants to connect remote sales tax collection to Internet access tax collection “when there’s no direct linkage between the two,” Mastria says. “Paying some sales tax above a monthly $21.95 Internet access fee has no relevance to merchants collecting in a state in which they have no nexus.”

Mastria suggests that mailers let their state governors and other representatives know that having to collect and remit remote sales taxes would put an unfair cost burden on them. “Some estimates put cost burden for remote sellers at 8% off their bottom line,” he says. “So we’re asking legislators and regulators to think about what they’re doing here, because they would be putting a lot of people out of business.