In this week's issue of E-Commerce Tax News, David Hardesty, CPA, MBA., considers the current stage reached in the process of simplifying US sales taxes, which has become necessary at this point because of the need to apply a uniform set of rules to the taxation of cross-border e-commerce.
Professor Hardesty reports that the Streamlined Sales Tax Project, which has been trying to develop a uniform set of rules for the operation of sales taxes has made substantial progress. The SSTP has so far produced two primary documents, the Uniform Sales and Use Tax Administrative Act (Act), and the Streamlined Sales and Use Tax Agreement (Agreement).
Those states which adopt the Act into law are authorized to enter into the Agreement with other states - the Act authorizes tax authorities to represent the state in negotiations with other states in the implementation of the Agreement. The Agreement contains a standardised set of procedures which will come into effect once five states have signed the Agreement.
The article lists 10 states that have signed Acts as of May 29th, and a further five where they have been passed but not yet signed. This is out of 26 states that participated in the SSTP process. Two versions of the Act are in fact current, one developed within the SSTP, and one developed by the National Conference of State Legislatures (NCSL). The two versions are not that different.
While good progress is being made with the Act, the Agreement is still in its early stages, says Professor Hardesty. . Workgroups are busy in such areas as sales tax holidays, caps and thresholds, multiple rates, uniform tax returns, electronic exemption certificates, sourcing of income, privacy, plus definitions of “digital products,” “software,” “leases,” and “rentals.”
Supporters of the SSTP seem convinced that momentum is on their side, says the article, while Congress also seems to have gotten the message that sales tax is no longer a local issue. Bills by Senators Dorgan (S. 512) and Wyden (S. 288) are both aimed at giving states the power to require remote sellers to collect tax, if the states simplify their tax systems. The bills in some ways mirror the SSTP effort. The prospects for a bill this year, however, are uncertain.
David Hardesty points out that without federal legislation, compliance with state-level legislation will be voluntary, and he suggests that this may not be forthcoming because of worries that state income tax might be applied to any seller who started paying sales tax, even though sales tax and income tax nexus are not linked.
It doesn't seem likely that there will be a resolution soon. 'The toughest part of the simplification process has yet to really get started,' says Professor Hardesty, 'Under the SSTP, states must individually adopt laws enacting simplifications specified by the Agreement. This means that legislators in each state house will have to go head-to-head with entrenched public and private interests.'
Read the full article at http://ecommercetax.com/doc/061001.htm
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