States team up to collect sales taxes on remote purchases.(SELECTED TOPIC)

Vendors and retailers selling items through catalogs and over the Internet--called remote purchases--are being courted by a group of states to voluntarily remit state and local sales taxes on these transactions. In September, a group of states initiated a voluntary program established by the Streamlined Sales Tax Project (SSTP) to collect sales taxes relating to remote purchases. One study estimated the amount of sales taxes state and local governments will lose in 2005 on remote purchases to be as much as $18 billion.

Some states want Congress to step in with federal legislation mandating such sales tax collection by vendors and retailers. However, Congress has been hesitant to do so, because the complexities and differences among state and local governments' sales tax laws and regulations would create a burden on sellers to collect such taxes. For example, some states collect sales taxes on clothing while others do not; several states don't collect sales taxes at all. In fact, in 1992 the Supreme Court ruled that it would be too onerous for e-tailers to calculate all the differing state and local taxes. So a major goal of SSTP is to remove that legal defense some retailers cite, in refusing to collect state and local taxes on remote purchases.

Those states that comply with SSTP standards must enact provisions in their tax codes to make them more uniform with each other. The states that have agreed to this collaboration so far are Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Oklahoma, South Dakota and West Virginia. Five more--Arkansas, Ohio, Tennessee, Utah and Wyoming--are finalizing the requirements needed to join; while Washington, Texas and Nevada are in earlier stages. Mark Muchow, Director of Fiscal Policy for the West Virginia State Tax Department, told NACM that, "West Virginia is a participating state and has all the changes to tax codes necessary to accept taxes in the agreement. We're in full compliance."

In order to help retailers and vendors calculate and collect sales taxes, the SSTP has certified several providers of sales tax software. As a further inducement to sign on to the program, participating states have agreed not to collect prior years' sales ...