A Burdensome Plan
The Streamlined Sales and Use Tax Agreement (SSTA), in the planning stages for many years, finally went into effect on Oct. 1, 2005. So far, it’s a voluntary program in which remote sellers collect state and local sales taxes and remit them to the jurisdictions in which their buyers reside.
As you know, merchants currently are required to collect state and local taxes only if they have nexus (a physical presence such as a store or headquarters) in the state. Consumers are expected to pay sales taxes on their online and catalog purchases. Of course, most don’t bother or don’t know it’s required. As a result, studies show states lost $18 billion to $23 billion in tax revenue in 2005.
The Sales Tax Fairness and Simplification Act, recently introduced by Senators Michael Enzi (R-Wyo.) and Byron Dorgan (D-N.D.), would require states to meet the standards outlined in SSTA. It also would require catalogers and e-tailers to collect and remit taxes imposed in all states and municipalities in which their buyers reside.
The senators would have you believe their bill levels the playing field between remote sellers and brick-and-mortar retailers. And they claim that states will have to increase property and income taxes to offset the uncollected sales taxes due them. The latter strikes me as a slippery slope argument meant merely to rile consumers.
The real issue here is the burden on remote sellers. There currently are about 7,600 sales tax jurisdictions in the United States, including states, counties, municipalities, and even sewer districts, sports arena districts and library districts, according to The Direct Marketing Association. That’s an awful lot of taxes for you, a remote seller, to track and pay. Just thinking about the paperwork and cost involved in such compliance makes my head hurt.
Of course, SSTA is supposed to streamline the compliance process by, for example, requiring states to supply merchants with free software to assist the collection and remittance processes. Fair enough.
But what about other burdens remote sellers would take on, for example, training contact center reps to explain the new tax charges to customers? And for customers who pay by check (mostly senior citizens), how would you organize your printed order forms to reflect 7,600 different taxes that buyers would have to look up to determine which to include in their payments? Would you have to print a separate order form for each customer? Think about that printing bill for a moment.
Catalogs are printed months in advance, and yet states can change their tax structures overnight, which is what Ohio and North Carolina did at the end of their fiscal years. How would you be expected to stay current on these issues?
While the issue of fair play with brick-and-mortar retailers is an important one, in my mind the SSTA’s unwieldy burden on remote sellers trumps that.
