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Efforts to impose sales tax on all Internet purchases will take a step forward on Oct. 1, when 18 states begin to operate under the Streamlined Sales and Use Tax Agreement. The states hope to win support for new federal tax-authorization legislation.
Efforts to impose sales tax on all Internet purchases will take a step forward on Oct. 1, when 18 states begin to operate under the Streamlined Sales and Use Tax Agreement, or SST. The states hope to win support for new federal tax-authorization legislation.
The 18 states have agreed to a common set of definitions and procedures for taxing multiple product categories under the SST, which has been designed to show the feasibility of a multi-state system of collecting sales tax across state borders. Under current law, states can only require Internet retailers to collect sales tax on transactions if they maintain a physical presence in the state where a buyer makes an online purchase.
Opponents of a multi-state or national system of imposing sales tax on Internet transactions have argued that, among other things, it would be too difficult to carry out because of all the different laws and product definitions in thousands of state and local taxing jurisdictions. The SST project was designed to prove that such a system could work under multi-state cooperation.
SST proponents have a long way to go, however, to win over remaining opposition and to win over support in Congress. “There’s still a lot of skepticism about the SST, and it’s not at all certain that Congress will pass a national tax law,” says John Logan, a tax expert with CCH Inc., a Riverwoods, IL-based provider of information on legal and tax issues and provider of tax-calculation software.
For example, Logan says, skeptics note that even if states agree to the same definitions of products to be taxed, they may still differ in the way they interpret those definitions.
But as more states join into SST as expected, Congress will be more likely to act, Logan adds.
The 18 states ready to participate in the SST Oct. 1 are Arkansas, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Tennessee, South Dakota, Utah, West Virginia and Wyoming.