Rapid changes in technology have forced changes to uphold the premise of free trade between states and refill the coffers left void by an undermining of the sales tax collection system insitu since the forefathers signed on the dotted line in Philadelphia.
On April 16th, 2005, there is to be a meeting in Washington of the delegates for the Governors and State Legislative Leaders committee to discuss the latest proposed amendments to the Streamlined Sales and Use Tax Act. The participating states are outlined on a NCSL (National Conference State Legislatures) map at this link. Some of the States not participating have no State sales Tax such as Montana. Others have not signed up for a variety of reasons but may sign up at any time in the future.
What is the Streamlined Sales and Use Tax Interstate Agreement and how does it affect you the online Seller and auction platform owner? The National Conference of State Legislators website outlines, in brief, the mission statement for the proposed legislation.Federal Legislation: The Streamlined Sales and Use Tax Act: “The Streamlined Sales and Use Tax Interstate Agreement provides the states with a blueprint to create a simplified sales and use tax collection system that removes the burden and cost from sellers and thus allows justification for Congress to overturn the Bellas Hess and Quill decisions. Legislation has been introduced in Congress, S. 1736 (Senators Enzi & Dorgan) and HR. 3184 (Congressmen Istook & Delahunt), “The Streamlined Sales and Use Tax Act” to give those states that have complied with the Agreement the authority to require out-of-state sellers to collect their sales and use taxes”
Registered in one State – registered in all!
According to the agreement “Each member state shall participate in an online sales and use tax registration system in co-operation with other member states”. A seller registering under one State is not required to pay for registration in the member states although they are obligated to collect all sales and use tax due and owing to that member state. Registration is covered on pages 10 and 36 of the outline.
Once implemented, there will be a new border patrol in place – an economic patrol that will ensure the equitable collection of taxes for online trading whether it be Auctions or fixed price sales. The current thrust of some individual states that are pushing thru current legislation to hasten the closing of the loop hole is only the front runner of what is to come.
Those States implementing new rules governing online auctions are setting up for the new border economic patrol. The unwitting Auction platform that will be behooved, by legislation, to provide the individual states with complete lists of all online sales, names of buyers and names of sellers. With lists in hand the states will have no problems enforcing tax collection and payment.
The increased responsibility of the auction platform.
Use taxes, prior, were often not universally collected because of the problem in tracking such purchases. With the advent of new legislation and the cyber age – this will tracking will become a moot issue as the lists will be instantaneously electronically available from the individual auction platforms and Sellers alike and downloaded directly to the state sales tax collecting entities. Since the auction houses, in some States, must be licensed (a growing trend in advance of this proposed legislation), they, by their license, agree to provide the states with all information thus allowing for cross reference between Seller, Buyer and the Auction Platform . The Illinois Statute Is the most comprehensive in this regard. More important is the Civic Federation suggests that Illinois will lose an estimated $295M in revenue if they continue with implementation as the legislation currently stands.
An entire new set of acronyms
The agreement is about to spin off a new round of cyber lingo. “CCPT” which stands for Customer Channel Termination Point translated to: the location where the customer inputs or receives communication. Or “HSP” standing for Home Service Provider. The proposal defines ” sales price to equal purchase price” for ease of implementation of Use Tax rules. Prior the Use tax was a rare self reported tax in all states that have such statutes on the books. And, finally, but not last is “TPP “: tangible personal property that can be seen, weighed, measured, felt, touched or even “smelled”. Yes the “nose” is an important part of this legislation. Nothing has been left to chance when it comes to collecting taxes. But then, who thought we would be selling a used grilled cheese sandwich with subliminal messages from the Virgin Mary thru the technology now known as cyber space when the premise of free trade was implemented?
No loop holes, no free ride except for the exemptions.
And even the exemptions have a “process” and a “form” not to mention to fact that the Seller is required to keep exact records of those sales and supply the information upon request as a part of their license to operate online.
After outlining the exemptions, the products are defined on page 63 – 75 of the legislation document. From beach capes and coats thru durable medical equipment to special rules for tax during the holiday season. At one point it defines the inability to sell one shoe in one tax season and the other shoe in the other tax season. There is no product or loop hole overlooked in this legislation which is going on three years in the making.
User Names no longer a hedge to privacy
Once this legislation is implemented – the anonymous nature of the net will once and for ever be negated by the myriad of forms the Seller will have to submit for taxes, exemptions, and refunds. The foot tracks in the sand will be very much be made available so that even the smallest online seller will be subject to tax and the tax collection burden will fall even to Grandma selling off her hand made aprons that she once sold to bolster her meager social security pension.
The ease of tracking buyers will make implementation of “user tax” far less complicated than it has ever been and internet trading will not be as attractive as it has in times of olde. This legislation is probably going to even the playing field between the internet and old fashioned “shopping across State lines” at your favorite stores where you drive to pick up the product for cash and the government entities are none the wiser and tracking for “user tax” is improbable if not impossible.
Who is underwriting the cost of implementation?
The old adage of “big brother is watching you” is personified with this legislation. Between the “listing”, “packing”, “shipping” and procurement of merchandise – I have to wonder where the typical online seller is going to have the time to keep up with this paper trail? It would appear that the Seller is underwriting the cost of tax collection with this legislation by providing all this information at “no cost” to the government entities. The typical full time online seller is already working 14-16 hours a day to watch dwindling profits after “fees”. I have to wonder about the economic impact of this impending legislation?
About the author:
Kathleen Johnson founded the Yahoo Group Appraisals and Expert Help group for assisting people with their antique appraisals and merchandising questions several years ago, and she still offers those services today. Kathleen is also under contract to Primedia Inc to Moderate the Allexperts Board at About.inc. For many years she worked as a registered expert on Yahoo Experts, Keen, AskMe and Allexperts. Kathleen continues to write articles on online facilitation but is currently working full time on the iCell.biz auction platform as it goes thru Beta testing.