Carol M. Morrissey has been a Legislative Specialist in Washington, D.C. for 15 years. She is a lawyer and legislative expert, and has authored a Congressional update column for LLRX.com since 1996.
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Taxation has always been a passionate issue for Americans. (“No taxation without representation!” “Ban the marriage penalty tax!”) The advent of e-commerce has spawned a whole world of Internet –based transactions and, as a result, state and local governments are worrying that their coffers are missing out on a large slice of the tax pie by their inability to tax online transactions. Although financial experts are not in agreement concerning the effect of this lost revenue, local officials are concerned about the bottom line, their tax-base.
The Streamlined Sales Tax Project
The Streamlined Sales Tax Project (the “Project”) is a coalition of 32 states seeking to simplify and reform the current tax system to allow the taxation of out-of-state sales and Internet-based transactions. The Project, working with The Task Force on State and Local Taxation of Telecommunications and Electronic Commerce of the National Council of State Legislatures (NCSL), developed a system of simplified tax rates and uniform product definitions, otherwise known as the Uniform Sales and Use Tax Administration Act and the Streamlined Sales and Use Tax Agreement. In order for the Act and the Agreement to be viable, they must be enacted by the individual state legislatures. So far, three states, Kentucky, Utah and Wyoming have given it their final approval. (The Streamlined Sales Tax Project website is at: http://www.geocities.com/streamlined2000/ and the Act and Agreement as Amended Jan. 2001 can be accessed at: http://208.237.129.206/sline/124amdedactandagrmt.pdf. The National Council of State Legislatures – Tax & Revenue State Internet Tax Force site is at: http://www.ncsl.org/programs/fiscal/tctelcom.htm and the NCSL Model Tax Act is at: http://www.ncsl.org/programs/press/2001/Web_Act.htm.)
State Legislation
The Project maintains a Status of State Efforts on Streamlined Sales Tax Project chart that tracks the states and their legislation. (The chart is at: http://208.237.129.206/sline/statestatus.pdf.)
Below are links to the bills, and the status is only included if the legislation has progressed past the committee stage. The information below is more inclusive than that provided by the Project since I have included bills or resolutions that were introduced, but have since been tabled.
The States
Alabama
HB 472 Streamlined Sales and Use Tax Agreement
S 321 Streamlined Sales and Use Tax Agreement
Arkansas
HB 2170 Uniform Sales and Use Tax Administration Act
Florida
SB 1638 An Act Relating to Sales and Use Tax Administration
HB 1329 An Act Relating to the Simplified Sales and Use Tax Administration
Iowa
SF 409 An Act Relating to Sales and Use Taxes
Illinois
SB 164 Creates the Uniform Sales and Use Tax Act (placed on Senate calendar)
Indiana
SB 269 Simplified Sales and Use Tax Administration Act (passed Senate)
Kansas
Kentucky
HB 367 An Act Relating to the Simplification and Modernization of Sales and Use Tax Administration (status only with a link to text – signed by the Governor)
Maryland
HB 1390 Simplified Sales and Use Tax Administration Act (link to the text – passed the House)
Massachusetts
H1523 Legislation to Provide for Uniform Sales and Use Tax Administration
(link to status only)
HB 1523
Minnesota
HF 1416 An Act Relating to Tax Administration
SF 1325 A bill for an Act relating to tax administration
Misssissippi
SB 2278 Streamlined Sales Tax System for the 21st Century Act (died in committee)
Missouri
HB 803 Simplified Sales and Use Tax Administration Act (Voted “do pass” by Ways & Means, see committee note with amendment at: http://www.house.state.mo.us/bills01/bilsum01/commit01/sHB803C.htm.)
SB 620 Simplified Sales and Use Tax Administration Act
Nebraska
LB 172 An Act Relating to Sales and Use Tax
Nevada
AB 455 AN ACT Relating to Taxation and Revenue
North Carolina
SB 144 An Act To Enable North Carolina To Enter the Streamlined Sales and Use Tax Agreement
North Dakota
SB 2455 A BILL for an Act to adopt a Simplified Sales and Use Tax Administration Act (Link to bill text – passed Senate and House)
Oklahoma
SB 703 Enacting the Simplified Sales and Use Tax Administration Act (failed on reconsideration)
Pennsylvania
HB 900 Providing for Multistate Sales and Use Tax Administration for Electronic Commerce
South Dakota
SB 166 Establish Streamlined Sales Tax Project Tax Force (signed by Governor)
Tennessee
HB 1459 Simplified Use Sales and Tax Administration Act
SB 1722 Simplified Use Sales and Tax Administration Act
Texas
HB 1845 Relating to Simplified Sales and Use Tax Administration
SB 1184 Relating to simplified Sales and Use Tax Administration
Utah
SB 74 Uniform Sales and Use Tax Administration Act and Sales and Use Tax Revisions (signed by the Governor)
Vermont
HB 457 Uniform Sales and Use Tax Administration
Virginia
HJ 668 Resolving that the General Assembly will participate in the Streamlined Sales Tax Project (tabled in Rules committee)
SJ 386 Encouraging the Governor to participate in the Streamlined Sales Tax Project (stricken in Rules committee)
Wyoming
HB 259 AN ACT relating to taxation and revenue (Chaptered)
The Time to Act is Now
While the states are pursuing their own path to sales tax reform, Congress is still treading water over the issue of Internet taxation. The Senate Commerce Committee, chaired by Sen. McCain (R-AZ) held an Internet Tax hearing on March 14, 2001. In his opening statement, Sen. McCain noted that Congress postponed action on the issue of Internet taxation in 1999, but must act before the current moratorium sunsets in October, 2001. Aside from proposals to extend the moratorium, he also referred to the possibility of compromise legislation which would “broaden the states’ authority to collect sales taxes from remote sellers.” (Sen. McCain’s remarks are at: http://www.senate.gov/~commerce/hearings/0314jsm.pdf. All of the witnesses prepared remarks can be linked to at: http://www.senate.gov/~commerce/hearings/hearings.htm, see March 14, 2001 hearing.)
Federal Legislation
Headlining the list of legislation introduced on Internet taxation is S. 245 by Smith ( R-NH). S. 245 would make the moratorium on discriminatory Internet taxes permanent, effectively preventing sales tax collection by perpetuating the status quo. (The text of S. 245.) S. 246, also by Sen. Smith, would extend the Internet taxation moratorium for another 5 years. (The text of S. 246) Sen. Smith’s most recent contribution to the debate is S. 589, which would make the moratorium on Internet taxation permanent. (The text of S. 589.)
The Internet Tax Nondiscrimination Act was introduced by Sen. Wyden (D-OR) and is cosponsored by Sens. Burns (R-MO) and Leahy (D-VT). S. 288 would extend the current moratorium on Internet taxation to 12/31/2006 and would also place a permanent ban on Internet access taxes. This legislation is also supported by Rep. Cox (R-CA). (The text of S. 288.)
The Internet Tax Moratorium and Equity Act, introduced by Sen. Dorgan (D-ND) is similar to legislation he introduced in the 106th Congress, S. 2775. S. 512 would extend the Internet tax moratorium to 12/31/2005, but more importantly, provides for states to form an Interstate Sales and Use Tax Compact. The Compact would impose uniform definitions for goods and services on member states and allow the collection of taxes on e-commerce transactions. (S. 512 can be found here. The text of S. 2775 from the 106th Congress is here.)
On March 29, 2001, Senators Gregg (R-NH) and Kohl (D-WI) introduced the New Economy Tax Fairness Act. S. 664 would prohibit
states from taxing online transactions unless the companies have a
“physical presence” within the state. (The text of S. 664; a press release announcing the introduction of the bill is at:
http://www.senate.gov/~kohl/press/032901.html.)
With or without the support of Congress, the states are moving forward with their tax simplification project. The October sunset of the current Internet moratorium is beginning to loom large on the horizon. That Congress will act this year on Internet taxation is a sure bet – the question is whether it will be a considered effort at consensus or a last minute extension to buy more time.