Leave it to Congress to Makes Sales Tax More Complicated

By March 13, 2014 Legislative, Retail

I’m reading with amazement the various testimony offered to Congress on March 12, 2014 concerning the initiative to allow states to require remote sellers to collect sales tax on all remote sales.  I’m comforted by the recognition that the cost of compliance for any business is not insignificant and that there are serious integration issues associated with the “free” sales tax software offered by the states.   What is most concerning are some of the options that special interest groups are offering.  http://www.salestaxstrategies.com/sales-tax-issues.html

One group is suggesting that sales tax be based on the “ship from” location and not the “ship to” location.  This is certainly an option which will be great for customers buying products from Delaware, New Hampshire, Alaska, Montana, and Oregon which don’t have sales tax.  I fail to see, though, how this strategy bridges the tax revenue gap in the states where the customer is located-which has been the primary argument of the retail community.  Further, how would this provide and incentive to purchase items from the brick-and-mortar stores in your home state?

One group is also suggesting that Congress implement a law similar to the “Webb-Kenyon” act which prohibits the shipment of property from one state to another state if the sale is not legal in destination state.  Under this approach, the Federal government wants to use the taxing power of the state to dictate what retailers can send property into a state.  As I follow their arguments, any retailer who is not registered for sales tax in the destination state would be deemed to be shipping property that is not lawful to be sold in the destination state.  Wow!

The best comment from the day was that if something were to pass the House this year, it would be during the “lame duck” session after the mid-term elections.  That is not very encouraging.  “We have to pass it so we will know what’s in it”!!

Even with the passage of some type of tax act, many savvy shoppers will still continue to shop primarily from web-stores (even if they do charge tax) because of the dramatic price difference of the products and offers of free shipping.  I’d hate to see what type of solution Congress has for that problem

Ned Lenhart, CPA
President