DMA Testifies Against Streamlined Sales And Use Tax Agreement Before The Florida Senate Committee on Finance and Tax

February 5, 2009 — Testifying today 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 not to join the Streamlined Sales and Use Tax Agreement (SSUTA).

While acknowledging the challenging, if not unprecedented, economic times for state governments and their need to cut costs and increase revenue, Jerry Cerasale, DMA’s Senior Vice President of Government Affairs, testified that, by joining the SSUTA, Florida would lose its sovereignty over its tax laws and not gain as much in uncollected sales tax income as proponents claim. Moreover, by joining the SSUTA, Cerasale explained that Florida would have to comply with the directives of the SSUTA Governing Board, which would require extensive and costly changes in Florida’s tax laws. Indeed, Cerasale noted that any financial gains obtained by joining SSUTA would be lost because the state would have to spend a substantial amount of money on changing its tax laws.

“Changes to Florida’s tax laws must be made as a condition of joining SSUTA,” said Cerasale. “However, these changes would not constitute the end of the tax directives from the Governing Board that Florida must follow. Yet to be decided under SSUTA is whether or not remote sellers should be compensated for sales tax collection; if so, how much; and, whether or not there will be a small business exemption for remote sellers; if so, how much. Therefore, the Governing Board—not the people of Florida represented by this legislature—would dictate to Florida how much tax revenue should be diverted to remote sellers and what small businesses should be exempt from Florida sales tax collection.”

Also in his testimony, which was delivered personally this morning in Tallahassee, FL, Cerasale addressed recent reports which indicated Florida would collect $2 billion in additional sales tax revenue if it joined the SSUTA. Noting a flawed 2000 University of Tennessee study that vastly overestimated the amount of uncollected sales taxes, Cerasale told the Committee that “those numbers will not be realized.”

Cerasale went on to say that the problem of uncollected sales tax is a self-correcting one, because after a company grows in size and prominence, it often becomes a multi-channel seller, with both Internet sales and the opening of retail stores. In terms of tax law, once a company opens a store, and, thus, has a physical presence in a state or “tax nexus,” the company is then required to collect sales tax on all Internet sales into the state.

“As companies grow in size, they frequently become ‘bricks & clicks’ operations,” said Cerasale. “Go to any direct marketing conference and see how much focus there is on how to reach customers and prospects in a multi-channel marketing environment. Multi-channel marketing is the wave of the future.”

Cerasale also told the Committee that 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.

About Direct Marketing Association (DMA)

The Direct Marketing Association (www.the-dma.org) is the leading global trade association of businesses and nonprofit organizations using and supporting multichannel direct marketing tools and techniques. DMA advocates standards for responsible marketing, promotes relevance as the key to reaching consumers with desirable offers, and provides cutting-edge research, education, and networking opportunities to improve results throughout the end-to-end direct marketing process. Founded in 1917, DMA today represents more than 3,400 companies from dozens of vertical industries in the US and 48 other nations, including half of the Fortune 100 companies, as well as nonprofit organizations.

In 2008, marketers — commercial and nonprofit — will spend $176.9 billion on direct marketing, which accounts for 52.1 percent of all ad expenditures in the United States. Measured against total US sales, these advertising expenditures will generate approximately $2.057 trillion in incremental sales. In 2008, direct marketing accounted for approximately 10 percent of total US gross domestic product. Also in 2008, there were 1.6 million direct marketing employees in the US. Their collective sales efforts directly support 9.3 million other jobs, accounting for a total of 10.9 million US jobs.

The Power of Direct: Relevance. Responsibility. Results.

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