On August 1, 2011, Sen. Dick Durbin of Illinois introduced Senate Bill 1452 “Main Street Fairness Act”. This Bill is identical to a Bill introduced in the previous Congress that essentially adopts the Streamlined Sales Tax Program (“SSTP”) and allows states that are Members of this association to require out-of-state remote sellers to collect sales tax on sales made to customers in their state even if they do not have nexus. The SSTP has been floating around for over a decade with about 20 states signing up. For the most part, this movement has been primarily involved with establishing uniform definitions and processes and has not done much about determining the actual uniform taxation of goods and services. SB 1452 does have an exemption for “small sellers” but the criteria for this have not been set.
This Bill is simply the latest in a long line of legislation that has been introduced for over 20 years in an attempt to allow states to force companies that do not have nexus to collect sales tax. There is no dispute that uncollected use tax is a serious issue for the states to deal with. Use tax continues to be one of the most widely assessed tax on audits. In the past these Bills have died in committee. The Direct Marketing Association (DMA) is a powerful lobby and has been successful in arguing defending or modifying this legislation. In the past, however, the state revenue situation has not been as bleak as it is now and a Bill like this might just pass this time.
In addition, I would not be surprised to see some type of attempt to impose a small federal sales tax on remote commerce as way to increase federal tax revenue. Who knows how creative these folks may get?
Ned Lenhart, CPA
Interstate Tax Strategies
Taxation of Internet Sales