Updated 10/9/08

Link to Streamlined Sales Tax Site http://www.streamlinedsalestax.org/ 11/7/05

The Streamlined Sales Tax (SST) Compliance Review and Interpretations Committee (CRIC) has established a 30-day public comment period for state compliance issues identified during its review of state recertification documents. The SST Agreement requires that each member state certify by August 1 of each year that it is still in compliance with the Agreement. Written comments should be sent by November 1 to Scott Peterson, Executive Director of the SST Governing Board, at Scott.Peterson@SSTGB.org. The CRIC will meet in a public teleconference on November 6, 2008, to review the comments. The CRIC’s report on the 2008 recertification. 10/9/08

Missouri legislation

On December 1, 2008, the Missouri Senate introduced S.B. 19 to conform the state’s laws to the Streamlined Sales and Use Tax (SST) Agreement, effective August 28, 2009. Similar conformity legislation was introduced but failed to pass in four previous legislative sessions. 12/17/08

Missouri introduced, but did not enact, S.B. 1020, to comply with the streamlined sales and use tax agreement. The legislation failed to leave the Ways and Means Committee before the Legislature’s session ended on 5/16/08. 5/30/08

The Streamlined Sales Tax (SST) Governing Board amended the SST Agreement to allow states that meet specified requirements (i.e. it must be an intrastate sale, excluding over-the-counter sales or leases and rentals) to become full members while continuing to source sales on an origin basis at the end of 3 days of meetings in Dallas, December 10-12, 2007. A state that has local jurisdictions that levy or receive sales or use tax may elect to source retail sales of tangible personal property or digital goods to the location where the order is received by the seller, rather than to the location where receipt by the purchaser occurs (or is presumed to occur). The seller’s sales tax recordkeeping system must capture the location where the order is received to qualify. 12/27/07

A number of states are engaging in ongoing work on a Streamlined Sales Tax Agreement, under which member states could eventually compel remote sellers to collect and remit sales and use tax on sales to purchasers in that state.

Once the Agreement goes into effect, it will remain a voluntary collection system as far as sellers without a physical presence in a given state are concerned. Collection by such remote sellers will become mandatory only if a court of competent jurisdiction rules that the complexity concerns underpinning Quill Corp. v. North Dakota, 504 U.S. 298 (1992), have been resolved, or if federal legislation is enacted granting states collection authority over remote sellers.

One of the goals is simplification and uniformity to facilitate compliance by remote sellers.

For the agreement to be implemented requires:

  1. Federal legislation giving states, in return for sales tax simplification, authority to require sellers to collect sales and use tax on remote sale, and
  2. by the terms of the Agreement, 10 states comprising 20% of the total population of all states imposing a state sales tax to petition for membership and have been found to be in compliance with the Agreement.

Optimistic supporters of the Agreement believe that could occur as soon as July 1, 2004. The Streamlined Sales and Use Tax (SST) Agreement came into effect on October 1, 2005. 11/13/05

The National Conference of State Legislatures (NCSL) Executive Committee Task Force on State and Local Taxation of Telecommunications and Electronic Commerce at NCLS’s July 21, 2003, annual meeting, reported that there are currently 39 Streamlined Sales Tax Implementing States (those that have adopted legislation authorizing them to enter into the Agreement), and to date, 20 states have passed legislation conforming their laws to the requirements of the Agreement. The group also restated its position on linking of federal legislation of the issue of collection authority with the issue of nexus standards for business activity taxes, and updated its policy statement on “Nexus in the New Economy: Ensuring a Level Playing Field for All Commerce.”

H.R. 3184, was introduced September 25, 2003. Retailers and government leaders debated the merits of a streamlined sales tax system at an October 1, 2003 hearing of the U.S. House Judiciary Committee’s Subcommittee on Commercial and Administrative Law. The bill includes the following provisions:

  • Small business exception:
    • The collection requirement would not apply (1) if the seller and its affiliates collectively had gross remote taxable sales nationwide of less than $5 million in the preceding calendar year, or, (2) if the seller and its affiliates exceed that threshold, if the seller itself had gross remote taxable sales nationwide of less than $100,000.
  • Seller compensation:
    • Collection authority would be granted only if a member state provided (1) reasonable compensation to sellers for expenses related to administration, collection, and remittance of tax, and (2) compensation to remote sellers covering all tax processing costs for a period of four years from the time the state is granted collection authority.
  • Judicial review:
    • An affected person could petition the Governing Board of the Agreement for a determination on any issue relating to its implementation. Review of the Governing Board’s action on specified issues could be sought in the U.S. Court of Federal Claims.
  • Simplification requirements:
    • The House bill sets forth minimum simplification requirements that the Agreement would have to satisfy, most corresponding to ones already in the Agreement. However, the House bill also would require that member states (1) apply simplification requirements to “transaction taxes on communications” by January 1, 2006; (2) provide alternative mechanisms in the uniform rules for sales tax holidays for remote sellers to participate; and (3) develop rules to prevent double taxation when a foreign country has imposed a transaction tax on a digital good or service.

Notes from the Streamlined Sales Tax Project (SSTP) and Streamlined Sales Tax Implementing States Meetings, Phoenix, November 17-19, 2003. The next meeting of the SSTP was scheduled for January 12-13, 2004, in San Diego, with Implementing States not expected to meet at that time.

  • Governance of the System A governance structure for the streamlined sales tax effort began to take shape.
    • Authority to administer the Agreement will rest with a Governing Board comprised of the states in compliance (any legislative or regulatory changes necessary to conform with the Agreement must be in effect, not just enacted).
    • To address unanswered questions about who had authority to amend the Agreement before it became effective, and who was authorized to take preparatory administrative actions during this interim period, the Implementing States approved two amendments:
      1) until the Agreement comes into effect, the Implementing States are granted authority to amend the Agreement with a 3/4 vote of the entire group. After the Agreement comes into effect, the Implementing States will continue to provide advice to the Governing Board for a period of 6 months to 1 year (designed to let states that have committed to join the Agreement but have not yet made the necessary conforming changes, including California and New York, to maintain a continuing voice in its effectuation).
      2) authorizing creating a Conforming States Committee, comprised of states that have passed (even if not in effect) legislation complying with the Agreement, as determined in good faith by the Implementing States co-chairs, to take steps to create the administrative mechanisms and staffing necessary for operational implementation of the Agreement (this lets the states negotiate with certified service providers and take other steps without having to wait until the conforming changes are in effect in all the states and the Governing Board has come into being).
  • Compliance Certification
    • The Implementing States approved in concept a draft of the certificate of compliance form states will be required to complete to document their compliance with the provisions of the Agreement. The tentative work schedule calls for state and business contacts assigned to complete the certificates to finish their work and make presentations to the Implementing States in March 2004. Contracts for certified service providers would be awarded in June 2004, and the contractors would be certified from July 2004 through the end of 2004.
  • Destination-Based Sourcing
    • States that want to conform to the Agreement are required to adopt destination-based rules for sourcing sales to taxing jurisdictions.
    • Neither Texas nor Washington enacted destination-based sourcing rules as part of their conformity legislation.
  • Objections to Destination-Based Sourcing
    • Destination-based sourcing was scheduled to be implemented in Kansas on July 1, 2003, but discontent by business people frustrated at the burden the new rules place on them resulted in enforcement of the sourcing rules has been delayed in Kansas. Kansas representatives also said that significant shifts of revenue will occur between localities with enforcement of these rules, which could force retail centers like Johnson County to consider property tax increases or layoffs in municipal government.
    • Kansas legislators made a plea for flexibility in applying the rules, such as a de minimis test or an exception for transactions involving an on-site purchase with delivery later. Business and state representatives to the SSTP were unanimous in telling the Kansas and Ohio speakers that states that want remote sellers to collect tax cannot expect out-of-state companies to comply with complex destination-based sourcing rules while they insulate in-state companies from the same burden. Bruce Johnson, Utah Tax Commissioner and Implementing States co-chair, said that Congress would never grant collection authority over remote sales with different rules for in-state and out-of-state companies, and courts would not permit such a system under current law. The National Retail Federation’s Riehl said that moving away from destination-based sourcing was a “non-starter.” However, several speakers suggested alternatives to consider include delaying implementation of destination-based sourcing for a few months, increasing the vendor discount for collection, and setting up a system for redistributing revenue between localities.
    • In Ohio legislation the effective date for the new sourcing rules delayed one year, until January 1, 2005 (H.B. 127).
  • Digital Equivalents
    • SSTP agreed to work on separate definitions for various digital categories at the next meeting (“downloadable music,” “downloadable video,” and “downloadable books”), but if the separate definitions prove unworkable, the states may revive the “broad” definition approach.
  • Sales Tax v. Use Tax
    • Historically, tax collected on remote sales has been characterized as a use tax. Some localities with a sales tax do not have a use tax, so would not receive revenue from remote sellers collecting a use tax under the Agreement. The group consensus seemed to be that the Agreement was not affecting the legal imposition of the tax, so a remote seller that volunteers to collect tax would be collecting the use tax that the buyer is currently liable for. This characterization will add complexity to the data that a seller will have to capture and report, and the alternative of requiring localities to enact a use tax would be contrary to the SSTP’s commitment to seek revenue neutral solutions.
  • Holding Purchasers Harmless
    • Member states will relieve sellers and certified service providers who relied on erroneous data provided by the state from liability for collecting the incorrect amount of tax. The suggestion that this hold harmless provision should be extended to purchasers was not agreed. Comments included that while abatement of penalties and interest was appropriate, the tax should not be abated because that would be a “windfall” to the taxpayer and would essentially allow the department to overrule the legislature.
  • Bundled Transactions” were discussed without reaching any finality.
  • Telecommunications Services
    • The proposed definition is limited strictly to transmission, and contains numerous exclusions, possibly resulting in states that adopt this definition having to enact new imposition statutes to continue taxing services they are taxing currently as telecommunications. The discussion may be rendered irrelevant by pending congressional action on the Internet Tax Freedom Act moratorium.
  • Single/Composite Rates and Boundary Database
    • The SSTP’s technology group plans to look at the issue of allowing both composite and single rates on the rates and boundary database being developed.
  • Sales Tax Holidays
    • The Implementing States approved amending the Agreement to:
      (1) add recommended procedures for uniform administration of sales tax holidays,
      (2) extend the deadline for defining “school related supplies” that may be exempted during sales tax holidays from December 31, 2003, until December 31, 2004, and
      (3) give florists temporary relief until December 31, 2005 from the destination-based sourcing requirement, reflecting the unique nature of the industry and the historic treatment of floral wire order sales.
  • Candy
    • The existing definition states that “candy” does not include any preparation containing flour. The Implementing States did not approve the change to the definition to not include any preparation in which flour is 1 of the first 3 listed ingredients proposed by James Turner, Indiana Department of Revenue, and referred the motion to the SSTP for further study.
  • Expressed Concerns at various forums:
    • Requiring vendors in states without a sales tax to collect taxes for other states would be perceived as unfair (dissenting votes on updated policy statement at 7/21/03 NCSL meeting).
    • Consumers will see the collection of sales tax on remote sales as a new tax, rather than enforcement of current state sales tax laws (Colorado Governor at 10/21/03 House hearing on HR 3184).
    • Billions of dollars that are in private pockets will go to public ones if H.R. 3184 passes, negating the tax relief passed in the 108th Congress (Colorado Governor at 10/21/03 House hearing on HR 3184).
    • Collection of the tax on remote sales will also hurt rural consumers who depend on the Internet for purchases (Colorado Governor at 10/21/03 House hearing on HR 3184).
    • Collecting the tax will dampen enthusiasm and technological innovation and cede state tax authority to a board that will govern the system (Colorado Governor at 10/21/03 House hearing on HR 3184).
    • The Agreement does not adopt a one-rate-per-state system, will not reduce the burden of collecting taxes, and will harm economic growth and hurt new businesses which rely on Internet commerce to compete with national chains (George Issacson, tax counsel for the Direct Marketing Association, at 10/21/03 House hearing on HR 3184)