DMA Dumps on Proposed Online Tax Bills

Two bills introduced Dec. 20 would allow states to force online sellers to collect sales taxes for all state and local taxing jurisdictions, and the New York-based Direct Marketing Association (DMA) is not happy about them.

H.R. 2152 introduced by Sen. Michael Enzi (R-WY) and H.R. 2153, introduced by Sen. Byron Dorgan (D-ND), are designed to help states collect the taxes from remote sellers, who do not have to remit sales and use taxes on catalog and Web purchases. The bills would mandate provisions of the Streamlined Sales and Use Tax Agreement (SSTA), a voluntary agreement that 18 states are now participating in: States that become voluntary members of the SSUTA could require that direct merchants collect and remit sales and use tax.

While the SSTA claims to offer a simplified, streamlined solution, the DMA contends that it would only add a new layer of complexity, expense, and burden for businesses nationwide. Neither bill addresses reducing the number of tax jurisdictions, which according to the DMA is a critical obstacle to a workable streamlined sales tax program. There are currently 7,900 separate tax rates in the U.S., says DMA’s senior vice president, government affairs Jerry Cerasale. The SSTA has talked of doubling that amount—resulting in more than 15,000 potential tax rates businesses would be subject to. “Is this really true simplification?” he asks.

Another problem is definition and classification–in certain states, for example, running shoes are classified as “clothing” while in others they go under the heading of “athletic equipment.” Cerasale says, “Clearly there are no uniform definitions by clothing category.” What’s more, it seems the SSTA has made no effort to move in the direction of single audits, Cerasale notes. As it stands right now, companies could be facing as many as 45 individual audits. “That’s ridiculous for small companies,” he says.