US States Canvass Bids For New Internet Tax Collection System

by Leroy Baker, Tax-News.com, New York

02 February 2005

The forty states (and the District of Columbia) which are working to get internet sales taxed under the Streamlined Sales Tax Project have issued two requests for bids from technology firms to design software and internet-based systems capable of tracking millions of online purchases for the purposes of collecting sales tax, the Washington Post has reported.

According to the Post, the request, issued by the states last month, calls on firms to design and build a registration system where all internet-based retailers would declare their intent to collect and remit taxes on online sales made to customers in the project's participating states.

The states plan to award contracts to multiple vendors, and it is thought that the vendors would earn a small commission from the revenues collected. It is envisaged that online retailers would not be charged for using the service.

A voluntary collection system working in at least 15 states - representing roughly one quarter of the US population - could be operational by October 2005, the Post reported. Once the system is in place, the SSTP participants hope that Congress will be swayed into introducing a national sales tax system for internet purchases.

Estimates of the amount of tax revenues currently uncollected on internet sales by state and local governments vary, although a study released last July by the National Governors Association and the National Conference of State Legislatures suggested that between $15.5 billion and $16.1 billion was lost during 2003.

Details of the firms showing an interest in building the new system are scant, but the Post noted that representatives from IBM, EDS, Accenture and a range of tax software companies made an appearance at the Streamlined Sales Tax Project's meeting in Phoenix last month.

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