Professor David Hardesty's ecommercetax site is carrying a description of how the Streamlined Sales Tax Project (SSTP) is currently carrying out a live test of a new on-line tax collection system developed by Taxware International and Hewlett-Packard.
The SSTP is a collaboration between a number of states (now more than 40) aimed at developing a harmonised sales tax regime which would allow unified taxation of Internet transactions. The Internet tax moratorium expires on October 21st, and there are a number of bills in Congress aiming to extend it, some of which incorporate aspects of the SSTP in a move towards making states' internet taxing powers dependent on their adopting a unified sales tax structure.
Obviously attention has been diverted away from such subjects in the last two weeks, but with less than a month to go, Congress will probably begin to work actively again on prolonging the moratorium. Hence the importance of trials which can demonstrate (or not) that systems can be put in place to minimise the enormous difficulties of harmonising the 9,000 different US sales and use tax regimes.
As Professor Hardesty points out, the SSTP is counting on technology to shoulder much of the burden of simplification. As Internet-based commerce grows, states anticipate huge increases in remote selling, which is exactly the area in which they had most difficulty in collecting tax. Because of their inability to force most remote sellers to collect sales tax, they fear the growth in e-commerce will be accompanied by mounting tax revenue losses. For this reason they are looking for ways to encourage or force remote sellers to collect the tax.
The Supreme Court ruled many years ago that states cannot force remote sellers to collect tax, largely because of the complexity issue. Now, many hope that through the SSTP and the possibility of a unified, technological solution to the problem, Congress will legislate to enforce remote collection.
Taxware, says Hardesty, is a long-time provider of tax collection software, and an early supporter of the SSTP. The company has teamed with Hewlett-Packard to create an remote online tax collection system. The solution works by receiving sales information through the Internet from unrelated sellers, calculating the sales tax, and sending the tax amount back to the sellers. All of this is supposed to happen, according to Taxware, within no more than 1.5 seconds. The system devised by Taxware and H-P is known in the SSTP as a Certified Service Provider (CSP) system.
In developing the system, Taxware is providing the tax calculation software and H-P is providing the hardware and systems support. Taxware’s parent company, govONE Solutions, a company that provides payment services to local, state, and federal governments, as well as financial institutions, is also providing technology.
Taxware has recently announced that it will conduct a pilot test of the newly developed system in North Carolina, Kansas, Michigan, and Wisconsin. The object of the pilot is to prove the viability of remote online tax collection and remittance systems. Once proven, these systems can be certified by the SSTP, and used to collect tax in the states participating in the SSTP.
The CSP system calculates sales and use tax for both Internet and traditional transactions, and remits the tax collected to the states involved in the pilot. That is, sellers can process both online and offline sales through the CSP. After calculating the tax, the CSP will ordinarily debit the amount of tax from the seller’s bank account, and remit this amount to the participating states.
Assuming the pilot is successful, and CSP systems start to be used in the US, speculates Professor Hardesty, the systems proven in the pilot may, for instance, be extended to collect value added tax. The EU's attempt to enforce collection of VAT by remote sellers of digital product to EU citizens has foundered largely on the technical and practical difficulties involved. The availability of technical solutions may one day allow the EU to reactivate its plans.
CSP systems can substantially decrease the complexity of online selling, concludes Professor Hardesty. However, such systems may not be widely available until the pilot is completed, and its results analyzed. This may take a year or more. However, pressure for a simpler system of tax collection may make something like the Taxware/H-P system an inevitable part of online retailing.
The full article is at http://ecommercetax.com/doc/091601a.htm
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