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American E-tailers Vow To Fight SSTP

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

10 December 2007


The US Electronic Retailing Association (ERA), has announced that it is "strongly against" taxation of internet transactions, and that it intends to fight the Streamlined Sales Tax Project (SSTP).

According to the ERA, the only trade association that exclusively represents electronic retailers, the SSTP would impede the development of e-commerce and impose substantial added costs and compliance burdens on electronic retailers. As an urgent industry and legislative concern, the groups says that the collection of taxes on internet transactions is an issue that must be dealt with "thoroughly and fairly".

“In a very short amount of time, the internet has become an unprecedented marketplace where the playing field is level for retailers both large and small,” Barbara Tulipane, ERA President and CEO, noted in a statement. “The Streamlined Sales Tax Project and its provisions would create a cost-prohibitive barrier for smaller retailers who are the lifeblood of our economy.”

Under the Streamlined Sales Tax Project (SSTP), states are required to establish uniform definitions for taxable goods and services, and maintain a single statewide tax rate for each type of product. The project also seeks to simplify tax reporting requirements for online sellers. But while some retailers support the SSTP, businesses in general are lukewarm or hostile to the plan, which they say will impose burdensome new recording and reporting requirements.

The ERA believes that while the original Streamlined Sales Tax Agreement (SSTA) approved by Congress was created to simplify multiple taxing jurisdictions, the current plan will make commerce more complicated for both merchants and consumers. The SSTA now permits each state to adopt an additional rate, and with 7,500 sales tax jurisdictions in the US, the ERA claims that there could be as many as 15,000 tax rates to administer.

“The Streamlined Sales Tax Agreement is a moving target. Its supporters claim that they have a streamlined collection system. That’s just not true – in fact their proposal has grown in complexity over the years due to the many interested parties,” argued Edwin Garrubbo, CEO of Creative Commerce. “It would be a nightmare for retailers to implement this system.”

The ERA thinks that the SSTA would unfairly discriminate against remote sellers in four ways: first, the burdens are much greater for remote sellers who must compute, collect and remit tax for thousands of jurisdictions, as compared to an in-state retailer who collects at just one tax rate; second, a direct marketer must “eat” the difference if a customer fails to remit the correct tax when paying by check – a problem that traditional retailers do not confront; third, in-state retailers benefit from a wide variety of state and local government services and programs (including tax incentives) that are not available to out-of-state merchants; and fourth, delivery charges on internet and catalog purchases usually exceed the amount of sales tax on those same goods – so the remote seller has no price advantage.

To date, only a handful of states have fully adopted the SST Agreement, representing a fraction of the US population. Five other states have said they will adopt the agreement by 2008. But the ERA says that the SSTA states are pressing Congress to require sellers in every state – even in states without a sales tax - to collect sales taxes for member states.

The ERA wants electronic retailers and consumers to fairly receive benefits from the taxes they remit. Furthermore, placing the responsibility on electronic retailers to collect and remit taxes creates a huge financial burden and is logistically cumbersome, it points out.

"At this time, it is clear that sales taxes are not streamlined and our government is not ready to implement a consistent and nondiscriminatory Internet sales tax system. ERA believes additional time is needed to reach agreement among all affected parties on a rational, practical and simple system for assessing and collecting taxes generated from Internet sales of goods and services," the group concluded.


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