Internet Taxation

Number of Tax Rates Could Balloon from 7,600 to 15,200

The Direct Marketing Association (The DMA) believes that The Streamlined Sales Tax Implementing States' Agreement fails to achieve a true measure of simplification. Although this proposal is strictly voluntary with both states and companies having the option to participate, if a similar measure were passed by Congress, it would represent an onerous burden on interstate marketers.

The Supreme Court has ruled twice that the burdens associated with collecting and remitting sales taxes on interstate purchases for the thousands of taxing jurisdictions in the United States would be an impediment to interstate commerce. The plan unveiled today would not significantly reduce or eliminate those burdens.

H. Robert Wientzen, DMA president & CEO, notes that, "If this proposal were enacted by Congress, it would effectively turn every cataloger and e-tailer into unpaid tax collectors for the states."

"The states should be given credit for tackling the messy sales tax system, but this proposal fails in a number of ways," said Jerry Cerasale, senior vice president, government affairs, The DMA.

Even the most fundamental step toward simplification is flawed in today's plan. For example, adopting one sales tax rate per state, regardless of whether goods are purchased online, by catalog or over-the-counter, continues to be elusive. In today's proposal, the states could continue to not only have 7,600 tax rates across the country, but worse still, each state could have a second state-wide rate, meaning interstate sellers could be confronted with not just 7,600 varying rates, but 15,200. This is not reform, but a step backward.

"We recognize and appreciate the hard work of the state and local government officials, as well as many representatives of business on this effort," said Frank G. Julian, operating vice president and tax counsel of Federated Department Stores, Inc. and chairman of The DMA sales and use tax committee. "But much more work needs to be done before the states can claim that they have achieved a true measure of simplification."

If you would like more information about Internet Taxation, please contact Louis Mastria at 1.212.790.1529 or Lmastria@the-dma.org