DMA Cautions on Simplified Sales Tax Bill

Washington, DC, May 25, 2007 – The Direct Marketing Association (DMA) is cautioning legislators about a bill introduced earlier this week that would allow states to force online sellers to collect sales taxes for all state and local taxing jurisdictions.

S. 34, introduced by Senator Michael Enzi (R-WY), would mandate provisions of the Streamlined Sales and Use Tax Agreement (SSTA), a voluntary agreement that 21 states are currently participating in. SSTA claims to offer a simplified, streamlined solution, but in fact would only add a new layer of complexity, expense and burden for businesses around the country.

“Unfortunately, the ‘The Sales Tax Fairness and Simplification Act’ is neither fair nor simple,” said Steven K. Berry, DMA’s Executive Vice President, Government & Consumer Affairs. “A truly workable simplification plan would standardize definitions of taxable goods across state borders and offer a single tax rate per state for all types and channels of commerce.”

In decisions in 1967 and again in 1992, the Supreme Court ruled that in order to be able to tax sales originating outside their boundaries, states must remove the burden placed on retailers by the complexity of having to comply with the requirements of thousands of different taxing jurisdictions.

There are currently more than 7,600 different sales tax jurisdictions in this country, including states, counties and municipalities, and even block-by-block areas. Currently, only businesses with a physical presence or "nexus" within a state are required to collect taxes for the jurisdictions within that state. “The failure of S.34 to address the need for a reduction in the number of tax jurisdictions remains a critical obstacle to a viable streamlined sales tax program,” said Berry.

Berry pointed out that many companies would not have sufficient resources to collect and remit sales taxes for each of the thousands of jurisdictions, much less to bear the cost of a possible audit at any time by 46 different state revenue departments (45 states plus DC impose sales tax).

DMA also cautions that the bill does not lay out strong enough requirements for creating consistent definitions of taxable goods. For example, in some jurisdictions tennis shoes are considered nontaxable clothing, and in others taxed as "athletic gear."

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About 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 3,600 companies from dozens of vertical industries in the US and 50 other nations, including a majority of the Fortune 100 companies, as well as nonprofit organizations.

In 2006, marketers — commercial and nonprofit — spent $166.5 billion on direct marketing in the United States. Measured against total US sales, these advertising expenditures generated $1.93 trillion in incremental sales. Last year, direct marketing accounted for 10.3 percent of total US GDP. Also, there are today 1.7 million direct marketing employees in the US alone. Their collective sales efforts directly support 8.8 million other jobs. That accounts for 10.5 million US jobs.

The Power of Direct: Relevance. Responsibility. Results.

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