The “Communicators” series on C-SPAN aired a discussion of Internet Sales Tax on Saturday, December 18. Participating in the discussion were Scott Peterson, Executive Director of the Streamlined Sales Tax Governing Board, Jerry Cerasale, Senior Vice President of the Direct Marketing Association, and Grant Gross, Reporter for IDG News Service (Computerworld, CIO, NetworkWorld, PC World, Macworld and Infoworld). The video provides a good representation of the internet sales tax collection debate, including:
– Estimates are that states are missing an estimated $20 billion a year in uncollected tax on remote sales.
– Sales tax collection requirements fall only on brick and mortar merchants (and companies with a warehouse or other physical presence in a state).
– The argument relied upon by Internet retailers to justify avoiding sales tax collection is almost 20 years old; dating back to the Supreme Court “Quill” decision in 1992.
Jerry Cerasale of the DMA states several times that out-of-state merchants should not have to collect for states where they do not benefit from police protection, fire protection, education or other services. Unfortunately, we feel he is missing the point of sales tax. Sales tax is a consumption-based tax on goods and services purchased by local residents. It is voted on by local voters (or those folks the voters put into office) for projects and services that benefit local communities.
Mr. Cerasale also greatly underestimated the technology available to handle sales tax collection. Not only is sales tax collection software available that conforms to the Streamlined Sales Tax agreement; we make TaxCloud available at no cost to merchants and it is extremely simple to integrate – less than 20 minutes from registration to sales tax collection in most cases. FedTax.net also indemnifies merchants from liability for sales tax collected using TaxCloud.
As Mr. Peterson clearly points out in the discussion, the world has changed in the 20 years since the Quill ruling. Businesses can sell nationally from any location in the country, using a variety of in-house and outsourcing models. To suggest that the Internet is still in its infancy and needs to be ‘sheltered’ from the business of sales tax collection is simply wrong.
The group also discussed the growing complexity of state initiatives to collect sales tax — Alabama’s mailing to consumers, Texas’ lawsuit against Amazon over nexus issues, and Colorado’s notification requirements for retailers. Passage of Main Street Fairness Act would eliminate the need for these one-off ‘solutions’ and make it easier for retailers and consumers to comply.