September 25, 2003
State Lawmakers Welcome Congress to Sales Tax Simplification Effort
Congressional bill seeks to give states power to collect sales taxes on remote sales
WASHINGTON, D.C. - At a Capitol Hill press conference today, the nation’s state lawmakers welcomed Congress into the effort to simplify state sales and use taxes.
“We are extremely grateful to our friends in Congress who have taken up this effort on behalf of the states,” said Pennsylvania Representative David J. Steil, chair of the National Conference of State Legislatures’ Budgets & Revenue Committee. “States have worked tirelessly over the past four years to simplify and streamline their sales and use tax systems to operate within our new economy.”
U.S. Representatives Ernest Istook and William Delahunt as well as U.S. Senators Michael Enzi and Byron Dorgan have introduced a measure, the Simplifed Sales and Use Tax Act, in their respective chambers that would grant states the authority to require internet and catalogue retailers to collect state sales taxes.
The U.S. Supreme Court has ruled that states cannot force retailers to collect the tax since keeping track of the rules in the 7,500 taxing jurisdictions would be a burden to interstate commerce. However, in the same decisions, the Court did acknowledge a consumer’s responsibility to pay the sales tax to the state despite the fact that the retailer does not have to collect it. The Court also implied that Congress could grant states the authority to require merchants to collect the taxes if sufficient efforts were made to overcome the complex rules.
As internet sales have skyrocketed over the past decade, states have experienced a steady erosion of sales and use tax revenue. The most recent research estimates state and local governments may have lost as much as $13.3 billion in 2001 because they were not able to collect sales taxes on Internet sales. Additionally, researchers estimate state and local revenue loss may rise to $45.2 billion in 2006 and $54.9 billion for 2011.
As a result, states have worked together to create the Streamlined Sales and Use Tax Agreement. The Streamlined Sales and Use Tax Agreement substantially simplifies state and local sales tax systems by making the various state sales and use tax codes look similar to one another while maintaining state sovereignty to set their own rates and bases. Areas of simplification include:
- Uniform product and administrative definitions;
- Standardization for sales tax holidays;
- Amnesty for participating voluntary sellers;
- Uniform rounding rules; and
- Uniform customer remedy procedures, among others.
Representative Steil believes that Congress’ willingness to enter into the sales and use tax debate will go a long way toward repairs the fiscal difficulties states have faced over the past two years.
“In adopting the legislation introduced today, Congress has the opportunity to provide fiscal relief for the states, without a single penny coming from the U.S. Treasury,” he concluded.
NCSL is a bipartisan organization serving the legislators and legislative staff of the states, commonwealths and territories. Its mission is to improve the quality and effectiveness of state legislatures, foster interstate communication and provide the states a strong, cohesive voice in the federal system.
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