The Streamlined Sales Tax Initiative
What is the purpose?
The goal of the streamlined sales tax is to create a system that simplifies sales and use taxes, and to also allow states to require remote vendors to collect sales and use taxes.
Wyoming's own petition for membership lists the following reasons for joining the SST initiative:
- To simplify and modernize sales and use tax administration.
- Reduce the costs and complexity of sales and use taxes for sellers.
- Increase voluntary compliance with sales and use tax laws.
- Such simplification and modernization is best conducted in cooperation and coordination with other states.
- Wyoming levies a sales and use tax under WS 39-15-103 and WS 39-16-103.
The petition can be found at: http://www.streamlinedsalestax.org/uploads/downloads/State%20Compliance/Wyoming/WY%20Petition.pdf
When was it started?
The streamlined sales tax initiative was started by the National Governor's Association and the National Conference of State Legislatures in 1999. It was created because sales tax is such a large part of states' revenues, and was created partially in reaction to remote sellers that do not collect sales tax, both denying states important revenue and creating an advantage against businesses with a physical presence in a state, and partially to encourage compliance with sales and tax laws by making them easier and less costly to administer.
How many states are members?
Twenty one states are full members, meaning that its laws, rules, regulations, and policies comply with the Streamlined Sales and Use Tax Agreement. Three additional states will have laws, rules, regulations, and policies enacted within the next year.
What does it require?
The Streamlined Sales Tax initiative requires:
- Uniform tax definitions
- Uniform and simpler exemption administration
- Tax rate simplification
- State level administration of all sales taxes
- Uniform sourcing
- State funding of administrative cost
How much sales tax is recoverable?
The Streamlined Sales Tax Initiative claims on their website that up to $23 billion in uncollected sales tax could be lost by the states by 2012 without federal action.
The National Conference of State Legislatures estimated up to $61.7 million is recoverable in FY 2012 in Wyoming alone (http://www.ncsl.org/default.aspx?tabid=20329). For the 2012 fiscal year, Wyoming only collected $2,034,883 in streamline taxes.
What is the issue with remote sellers?
Because remote sellers do not have a physical presence in the state they sell in, like an office or storefront, they are not required to collect state and local sales taxes. The Supreme Court has ruled in 1992's Quill v North Dakota states do not have the authority to collect sales tax on remote sellers until Congress acts. Attempts to pass laws giving states the authority to tax remote sellers have not yet been passed. This is partially because the sales tax systems in different states were so different that it would be difficult and expensive to administer sales taxes on remote sellers' transactions.
The Main Street Fairness Act, HR 5660 was recently introduced to Congress and would give this authority to states.
Why are uniform definitions important?
Uniform definitions concerning sourcing, or where a transaction is taxable would help clear up any uncertainty for businesses about what tax rates are applicable. State administration helps to clear up what authority the tax has to be remitted to, so that companies do not have to pay taxes to every separate county for transactions inside their authority, and uniform definitions help to avoid confusion that rises when one state defines taxable transactions differently than another.
Why is federal legislation necessary?
1992's Quill v North Dakota states that states cannot require remote sellers to collect sales tax until congress acts. Because remote sellers can avoid sales tax they have a competitive advantage over stores that sell from a physical location, and states lose out on sales tax revenue. For the state of Wyoming, sales and use tax revenue made up 41% of General Fund Revenues in 2011 with $470,905,619 allocated to the fund. It is a large amount of most state's revenue.