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June 9th, 2009, 04:29 PM #1
What's Wrong with the SSTP (Streamlined Sales Tax Project)?
- Join Date
- January 18th, 2005
I think it might be useful to discuss whether the "Streamlined Sales Tax Project" (SSTP) might solve some or all of the sales-tax and "Amazon Tax" problems that have been the source of so much concern on ABW over the past year. Most specifically, if the U.S. Congress enacted "enabling legislation" to support the SSTP, would states join the effort?
- Why haven't more states joined the SSTP?
- If the U.S. Congress enacts "enabling legislation", would more states participate?
- What would be the impact of the SSTP if some states choose not to participate?
First, please note that some states have different names for what are generally lumped into the category of "sales taxes" (sales tax, excise tax, use tax, service tax). I'm using the term "sales tax" in this broad sense, but I believe that the concept of "sales tax" generally excludes some specific taxes that are functionally similar, such as taxes on liquor, tobacco, fuels, hotel accomodations, and utilities.
Here is a quick summary of my understanding of some issues that may lead some states to choose not to participate in the SSTP:
- Requirement of State Legislative Enactment: In order to participate in the SSTP, states must enact specific legislation which would modify their sales tax laws and regulations to conform to the specific provisions agreed upon by the SSTP. Legislators have a wide range of reasons to oppose specific requirements and provisions; it's likely that there would be enough "special-interest pressure" and "unacceptable provisions" that many states could never gather enough legislative votes to enact the required legislation. To the extent that changing the sales tax law results in a revenue drop, legislators would also need to balance their state budgets somehow (perhaps by raising the sales-tax rate to recoup the taxes lost on some categories of products and services).
> "Streamlined Sales Tax envisions two components to the legislation necessary to accomplish the Project’s goals. First, states would adopt enabling legislation referred to as the Uniform Sales and Use Tax Administration Act (“Act”). The Act allows the state to enter into an agreement with one or more states to simplify and modernize sales and use tax administration in order to reduce the burden of tax compliance for all sellers and all types of commerce. The Act does not require any amendments to a state’s sales and use tax law. Secondly, states would amend or modify their sales and use tax laws to achieve the simplifications and uniformity required by the participating states working together. The Project refers to this legislation as the Streamlined Sales and Use Tax Agreement (“Agreement”). Some states will require only minor changes to current law to implement the requirements of the Agreement. Other states with more complicated sales tax laws may require significant changes to current law to be in accord with the Agreement." < (from the SSTP Implementation Guide)
- Loss of Local Control: States participating in the SSTP would surrender their right to impose specific sales tax rules that differ from other states. (For example, states would be unable to impose a "soda tax" as some politicians have proposed, because this would create a different tax rate.) Even in the absence of any specific objections, state citizens and politicians would likely be concerned about such a sweeping surrender of states' traditional right to define and fine-tune their tax laws.
- (Simplification of) Categories of Taxable and Non-Taxable Goods: Each state has different rules about which specific products and services are subject to the state's sales tax. In many states, the rules are incredibly complex and sometimes contradictory, with some commodities subject to tax in some situations but not others. The SSTP would impose a uniform set of definitions and categories subject to sales tax (or excluded from sales taxation). These definitions are outlined in a series of "issue papers".
- Amnesty: States participating in the SSTP must agree to an "amnesty period" under which merchants who begin collecting sales tax for the state are not subject to enforcement action for their failure to collect sales tax in past years. This may be perceived as "rewarding lawbreakers," or as a loss of potential revenue from any enforcement actions.
- Technical Implementation: The SSTP would require states to conform their sales-tax reporting and payment collection (using specific XML schemas for submission of registration, information reports, payment remittance, and acknowledgements). It appears that states would be required to use "Certified Service Providers" for this purpose.
- Multiple Sales Tax Districts within a state: I had understood that the SSTP would prohibit the imposion of multiple sales tax rates within a single state, but I was wrong: the SSTP instead provides a mechanism for states to create "boundary databases" that clearly define what sales tax rates apply (based on either zip-code or address-specific data). Some states (including California) have multiple sales-tax rates because certain political districts within the state have enacted extra sales taxes, usually for specific purposes. In California, for example, several counties within the San Francisco Bay Area have enacted sales-tax surcharges to support the cost of building, expanding, and operating the Bay Area Rapid Transit (BART) service. Residents of each county have voted to impose these special taxes in order to receive specific benefits.
- Compliance and Audit Costs and Risks: The SSTP requires enactment of some uniform audit standards, but merchants would still be subject to individual audits by each state. Imagine the cost of responding to audits from 5, 10, or 20 states; then imagine the risk of adverse findings of uncollected/unremitted taxes, and the interest and penalties that might be imposed.
Some related ABW discussions:
Last edited by markwelch; June 9th, 2009 at 04:56 PM.
June 9th, 2009, 04:49 PM #2
- Join Date
- January 18th, 2005
SSTP member states represent 30% of the U.S. population.
The six largest states (California, Texas, New York, Florida, Illinois, and Pennsylvania) are not members.
The four largest U.S. states (California, Texas, New York, Florida) together have more residents than all SSTP states combined.
- SSTP Full Members: Arkansas, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, Oklahoma, Rhode Island, South Dakota, Vermont, Washington, West Virginia, Wyoming.
- SSTP Associate Members: Ohio, Tennessee, Utah.
- Non-Member States with Sales Taxes: Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Missouri, New Mexico, New York, North Dakota, Pennsylvania, South Carolina, Texas, Virginia, Wisconsin.
- Non-Member States without any sales tax: Alaska, Delaware, Montana, New Hampshire, Oregon
Last edited by markwelch; June 9th, 2009 at 05:13 PM.
June 17th, 2009, 11:59 AM #3
i would love to see SSTP go through. It would make e-tailers lives a lot easier. They have the same thing in Europe and its working great for them. I will be writing my state representatives about supporting this measure.
I think its nonsense that if you want to sell on the web you need to learn 52 different tax laws.
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