Legislation introduced in Congress that would require internet retailers to collect state and local sales taxes stands a fairly good chance of passing in the first few months of 2004, according to supporters of the bill.
The bill, sponsored in the Senate by Byron Dorgan (D-SD) and Michael Enzi (R-WY) and in the House by Rep. Bill Delahunt (D-MA), gives Congressional approval to a national compact made up of states that have simplified and aligned their sales tax rules and regulations. Once states have sufficiently simplified their tax codes and joined the compact, they would be allowed to require internet and mail order retailers with more than $5 million in annual sales to collect local and state sales taxes.
Supporters argue that e-commerce companies like Amazon.com should be subject to the same sales tax requirements imposed on bricks-and-mortar stores. The legislation would also restore millions of dollars in state and local revenue lost as consumers have migrated to internet shopping.
The Supreme Court has ruled that requiring remote sellers (e.g., mail order or internet companies) to comply with the various rules and rates governing the nation’s 7,500 local sales tax jurisdictions would impose an unreasonable burden on interstate commerce.
Led by the National Governors Association, a group of states began working several years ago to streamline and simplify their sales tax rules, thus removing the burden of collecting taxes for multiple jurisdictions and opening the way for the bill now before Congress.
To date, 32 states have approved a model interstate agreement that establishes uniform sales tax rules and definitions, and 20 state legislatures have enacted implementing legislation.
Under the new rules, states and cities will still have the authority to determine what goods are taxed at what rate, but must adhere to rules governing such things as how and when they can change tax rates, as well as uniform definitions (e.g., whether marshmallows are considered food or candy for tax purposes).
– More on the bill and the Streamlined Sales Tax Project
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