March 7, 2003, 12:00 AM

State officials target next year for Internet sales tax

The Streamlined Sales Tax Project is lining up states in its efforts to create common product definitions in preparation for creating uniform taxing standards across web retailers.

By the end of next year if not sooner, a long-awaited system that would force e-retailers to collect sales tax across multiple states--whether or not they have a physical presence in the buyer`s home state--could become reality, Diane Hardt, a Wisconsin revenue official who co-chairs the Streamlined Sales Tax Project, tells Internet Retailer.

The SSTP, formed by 37 states and the District of Columbia, is developing a sales tax simplification and uniformity plan that would get states to agree to impose a single state-wide tax rate on all but certain exempted items, and a single rate from each local taxing jurisdiction, and to agree on common definitions of items. For instance, the group could decide whether apparel includes accessories such as belts and shoes. Once the uniform plan is in place and supported by enough states, state officials expect Congress to pass legislation allowing states to mandate collection of tax for all online retail sales.

Hardt and other SSTP officials say they expect no problem meeting the SSTP`s self-imposed minimum of getting support for its plan from 10 states, whose total population must equal at least 20% of the population of all states that impose sales tax.

Hardt adds that it`s even possible that Congress could approve the project this year, though she admits that may be unlikely because Congress appears inclined to insist on having at least 20 states sign off on it.

The SSTP is also developing a system under which retailers could use state-certified and pre-audited software systems to collect taxes from multiple states. This is considered a crucial element of the project, because there are more than 7,000 local taxing jurisdictions that impose tax in addition to states. Use of certified or pre-audited software would shield retailers from audits to make sure they are collecting the appropriate amounts.

Once Congress approves the project, it`s expected to enact a law granting the participating states the authority to require retailers to collect tax on all online sales, regardless of whether they maintain a physical presence in a shopper`s home state.


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