DMA Testifies Against Streamlined Sales and Use Tax Agreement Before Florida Taxation Commission

January 18, 2008 — Testifying yesterday afternoon before the Committee on Finance and Taxation of the Florida Taxation and Budget Reform Commission, the Direct Marketing Association (DMA) strongly urged the State of Florida against joining the Streamlined Sales and Use Tax Agreement (SSUTA) compact.

“Joining the Streamlined Sales and Use Tax Agreement compact is a lose-lose proposition for Florida taxpayers,” DMA Vice President of Government Affairs Mark A. Micali told the committee. “This agreement is anything but streamlined or simplified. It fails on every level and should be soundly rejected by the State of Florida.”

According to Micali, one key reason a state would adopt the SSUTA is to be able to force a company to collect sales taxes even if the company had no physical presence in the taxing state.

However, in an attempt to garner support for the compact, Micali pointed out that SSUTA’s proponents have drastically overestimated the amount of uncollected sales tax that would result from online sales. Moreover, he said, this concept is based on the premise that Congress will eventually grant the states legislative authority to mandate such tax collection.

In its 1992 Quill Corp. v. North Dakota decision, the US Supreme Court ruled that, absent Congressional approval, states cannot impose sales tax collection duties on out-of-state companies without a physical presence or “tax nexus” in the taxing state. In the 16 years since the Quill decision, legislation to overturn Quill, and thus mandate sales tax collection, has failed to pass out of any US Senate or House subcommittee or full committee.

In his testimony delivered personally Thursday afternoon in Tallahassee, FL, Micali added, “If Florida were to join the SSUTA the state would face a potential loss of sales tax revenue in the tens of millions of dollars due to a number of mandated requirements within the compact.” Furthermore, he said, “From the point of view of what is in the best interest of creating a 21st century, Internet-friendly tax regime to encourage economic growth throughout the national marketplace, SSUTA again fails — in fact, it fails dramatically.”

Micali said DMA and its membership remain adamantly opposed to the SSUTA, and believe the Internet should remain free from burdensome taxes in order to ensure its continued growth and viability.

“The SSUTA is a document drafted by tax administrators, and as might be expected, it resulted little in the way of tax simplification,” Micali told the Florida panel. “Specifically, the SSUTA fails to reduce the number of sales tax jurisdictions in the United States, which currently number 7,500. It fails to reduce the number of state and local sales tax rates. And it continues to subject interstate sellers to audit by each state’s revenue department across the country.”

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