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9/30/2005
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Some Voluntary Collection Of Internet Sales Taxes Started Saturday

It's an important milestone in the effort to tax Internet retail sales.

An important milestone in the effort to tax Internet retail sales will be reached Saturday when a group of states adopt provisions established by the Streamlined Sales Tax Project (SSTP) to collect sales taxes.

The voluntary program is a big step toward establishing more uniform ways of collecting some $18 billion in taxes that are currently lost to states and municipalities. Congressional leaders have said they will step in with federal legislation once states have hammered out agreements among governments and retailers on sales tax collection machinery.

“October first is just another step towards collecting more taxes,” said Charles Collins, vice president of government affairs at Taxware, a vendor of tax calculation and compliance systems. “It’s voluntary. A lot of retailers won’t start until after the holiday shopping season. It’ll be a gradual effect.”

Collins, a former co-chair of the SSTP, said the Oct. 1 provisions will likely cause more merchants to comply voluntarily and begin collecting sales taxes. There are still enormous differences among states in how they collect sales taxes. Some, for instance, collect sales taxes on clothing while others do not. And some states don’t collect sales taxes at all.

According to Collins, the states that will be in full compliance with the SSTP provisions include Indiana, Iowa, Kansas, Michigan, Minnesota, Nebraska, North Carolina, North Dakota, Oklahoma, Kentucky, South Dakota, and West Virginia. States in partial compliance that are associate members of SSTP include Arkansas, Wyoming, Ohio, Tennessee, Utah and Nevada.

The nation’s largest two states – California and New York – are involved in the project but are still working on their own sales tax measures.

The SSTP has certified several providers of sales tax software in a major move to establish uniformity in the crazy quilt pattern of sales taxes. The providers are Avalara, an EDS-Vertex partnership, an Exactor-Sabrix partnership, Salis, Sales Tax Solutions and Taxware.

Still challenging tax authorities and retailers is the nagging question of nexus, of whether a retailer has a physical location in a state where customers are located. Which state receives the sales tax collected – the retailer’s state of shipment or the customer’s state of receiving?

Some states don’t have any sales taxes, but retailers located in them could be required to collect sales taxes for shipments made to customers in taxing states. States without sales taxes are Alaska, Delaware, Montana, New Hampshire and Oregon.

Collins said some members of Congress have expressed interest in proposing federal legislation that would regulate sales tax collections over the Interest if and when states voluntarily develop a semblance of uniformity on the issue. He added that the October provisions go a long way towards meeting that goal, but he expects it will be at least another year or two before Congress will act on a federal program.

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