Yesterday, Megan blogged about the Streamlined Sales Tax Project (SST). SST is a cooperative sales tax initiative for voluntary states. The states come into compliance and agreement together to figure out a way to collect sales tax on every sales, based on the “destination” of the sale. In other words, if you live in California and buy from a Florida merchant, you’ll pay California sales tax. It’s a nightmare for the Florida merchant because she now has to track sales tax rates and rules in 50 states.
SST has gotten stalled. Apparently, it’s hard for independent states to agree on the details. And now it looks like they might not have to.
Big Brother Congress has decided it’s time to take care of the sales tax issue to raise taxes quickly. Dubbed the “Internet Tax” it was struck down a few years ago by an aggressive lobbying effort by Amazon, eBay and other big online sellers (and auction houses).
Here’s a link to a great CNET article on the resurgence of the Internet Tax project. http://news.cnet.com/8301-10784_3-9919420-7.html
The problem I see is that it’s simplistic and idealistic. SST got bogged down because the definitions of what is taxable and non taxable vary radically from state to state. Other states have city and local taxes that are based on origin. SST was attempting to modify to allow for that. For example, if you had a business in Dallas and sold to New Jersey, your business would collect tax for the Dallas city sales tax and the New Jersey state sales tax. I don’t see any solutions like that in the Internet Sales Tax. It simply doesn’t have the finesse that is required to make this work for businesses.