The US National Retail Federation and nearly 100 retailers and trade associations are urging Congress to approve legislation making it easier to require internet merchants, mail-order houses and other “remote sellers” to collect sales tax across state lines.
Coalition members are hoping to see action this fall on the Sales Tax Fairness and Simplification Act, which is pending in both the House and Senate. The measure would allow states that have implemented the Streamlined Sales and Use Tax Agreement to require that out-of-state merchants collect sales tax on merchandise sold to residents of their states.
Retailers would be compensated for the cost of sales tax collection, and collection could be outsourced to certified service providers. Retailers with less than $5 million in annual gross remote sales would be exempt.
The Streamlined Sales and Use Tax Agreement, which simplifies sales tax law and creates a mechanism for collection and distribution across state lines, was developed in 2002 in response to a 1992 US Supreme Court ruling which stated that remote sellers could only be required to collect sales tax from customers in states where they have a physical presence. With more than 7,600 state and local jurisdictions collecting sales tax – many with different rates, different lists of taxable items and different definitions – the court held that out-of-state merchants could not be expected to know what to collect.
“The states have made great progress,” NRF and the other groups said in a letter to the sponsors of the legislation. “We now call on Congress to respond to their efforts by passing this legislation.”
“Brick-and-mortar retailers are currently required to collect sales taxes while many on-line and catalog retailers are not,” the letter added. “This is not only fundamentally unfair to Main Street retailers, but it is costing states and localities billions in lost revenue. This further threatens vital public services including health care, education and public safety.”
The letter was signed by 98 members of the Sales Tax Simplification Coalition, which includes individual retailers, along with NRF, a number of state retail trade associations, and other associations representing retail segments such as book stores, convenience stores, college stores and shopping centers.
The letter was sent to Senator Mike Enzi (R-Wyo.), sponsor of the Senate version of the bill, along with Representative William Delahunt (D-Mass.), the sponsor of the House bill, and co-sponsor Representative Ray LaHood (R-Ill.) A similar letter will go to all members of the House and Senate this week.
While the Streamlined Sales and Use Tax Agreement went into effect on a voluntary basis in 2005, the coalition says that passage of federal legislation is needed before sales tax collection can become mandatory. Thus far, 22 states have passed legislation implementing the agreement. In addition, more than 1,000 companies have participated in the agreement voluntarily, and have collected more than $125 million in state and local sales tax that would otherwise have gone unpaid.
The NRF helped draft the Streamlined Sales and Use Tax Agreement, and has long argued that remote sellers enjoy an unfair price advantage in situations where they are not required to collect sales tax. The NRF wants a level playing field where all retailers are subject to the same tax rules when their merchandise is sold from a store, through a catalog or over the internet.
The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores..
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