WASHINGTON — Four groups representing localities are forming an advisory council as part of the Streamlined Sales Tax agreement to focus on local tax issues and to push for Congress to approve online sales-tax legislation.
“Sales tax is major component of local government funding,” said Scott Peterson, executive director of the SST Governing Board Inc. “The governing board has always felt it was necessary to include every entity involved in sales tax.”
It’s unclear how many people will eventually serve on the local advisory council, but members from the Government Finance Officers Association, the National Leagues of Cities, the National Association of Counties and the U.S. Conference of Mayors will be represented, said Mike Bailey, finance director for Redmond, Wash., and ex-officio member of the SST Governing Board.
He hopes the advisory council will be fully operational by the fall.
“This new committee gives us an opportunity to be a little more focused on the local issues that come up with respect to the administration of the sales tax,” Bailey said.
The National Conference of State Legislatures estimates states will lose $23 billion this year by not being able to collect sales taxes from online and catalogs purchases. Most online transactions are tax-free. Brick-and-mortar retailers who collect sales taxes argue that e-commerce companies have an unfair advantage.
The Market Place Fairness Act, introduced last year by Sen. Mike Enzi, R-Wyo., gives states the option of collecting the sales taxes they are owed under current law from out-of-state businesses, rather than relying on consumers to pay them. Similar legislation, called the Marketplace Equity Act, was introduced in the House last year by Rep. Steve Womack, R-Ark.
Generally, states have been blocked from requiring Internet retailers overall to collect sales taxes by a 1992 Supreme Court decision in Quill Corp. v. North Dakota. The high court ruled that states could not impose a tax on Quill because the office supply retailer did not have any physical presence in North Dakota.
The court’s reasoning was based partly on the concern that there are thousands of separate sales tax jurisdictions, and if they adopt varying tax requirements, interstate commerce could be severely restricted.
The Streamlined Sales Tax Project was created in 2000 to help states adopt uniform standards for what is taxed across state lines so they could mitigate the Supreme Court’s concerns. Currently, of the 44 states involved with the project, 24 have enacted legislation in line with the project’s model. Massachusetts has such legislation pending.
The SST’s primary goal is passage of the Marketplace Fairness Act, but until then, the group is working to ensure that states are developing sales tax rules now that can be standardized across all of the states that are participating in the SST agreement, Bailey said.
Local government groups and the SST believe that the momentum to get an online sales tax passed this year has never been greater, according to Susan Gaffney, director of GFOA’s federal liaison center.
“State and local governments as well as many retailers, have made enacting the Marketplace Fairness Act a priority and are optimistic that Congress may get it done this year,” she said.
The renewed push comes at a time when many cash-strapped states and localities are keen to raise more revenue. Gaffney said the groups are looking for any major legislation, not just a tax bill, that could serve as a vehicle for the online sales tax bills introduced by Enzi and Womack.
Meanwhile, the National Retail Federation has launched a 60-day, $10 million grassroots campaign urging Congress to approve the Marketplace Fairness Act. The campaign will target retailers, voters and small businesses in 17 states through print and online ads. Many of the areas are represented by members on the House Judiciary Committee, which oversees the online sales tax issue.
“Congress is naming winners and losers by its failure to address this issue, and the brick-and-mortar retailers who create jobs across our country want action on this issue now,” said Matthew Shay, NRF’s president and chief executive. “All retailers should compete on a level playing field with the same set of sales tax rules.”
The House Judiciary Committee plans to hold a hearing on the issue in July.
