The Streamlined Sales and Use Tax Agreement Is Not Meaningful Simplification

Although the Streamlined Sales Tax Implementing States tout the Agreement as representing tax simplification, if the Agreement is coupled with the legislative repeal of the Supreme Court’s 1992 Quill decision (the acknowledged goal of the participating states), it fails to meet the test of genuine simplification. As noted below, under the Agreement there will actually be an increase in complexity for interstate sellers, not an increase in simplicity.

*There is no reduction in the number of tax rates, and the number could go even higher. Each state is allowed to have a second state tax rate on certain categories of products. This is in addition to all the local rates. Thus, the current 7,600 rates could double to 15,200.

*The Agreement’s claim of “uniformity” of definitions unfortunately provides considerable “wiggle room” for the states. Specifically, the Agreement only requires that a state adopt definitions which are “in substantially the same language.” Thus, states have a grey area to interpret nuanced definitions opening a “Pandora’s Box” on non-uniform definitions of products.

*The system relies on a multitude of computer programs, databases, etc., which do not exist. The states must prove that their system can work and is, in fact, “user friendly” before it can be mandated to all sellers.

*Compensation for collecting sales tax – there is absolutely no assurance that there will be adequate compensation for collecting sales tax.

*The Agreement’s governance provisions result in the states policing themselves Compliance is turned over to a non-elected and self-regulating Governing Board, which is empowered to determine each state’s compliance with the Agreement. In effect, “the foxes will be guarding the hen house.”

*The Agreement purports to simplify administration, but provides no mechanism to enable interstate sellers to avoid considerable burdens of compliance.

--Although each state may require only a single return for all jurisdictions in the state, it does not limit the length of the return or the amount of information to be provided.

--Audit exposure will be substantial. Where a seller may be subject to audit by only one state or a few states under the Quill standard, it will now be subject to audit in dozens of states.

--A fairer system would have a single state performing the audit (generally the company’s “home” state performing the audit) on behalf all the other states, and include provisions governing the scope of the audit.

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