Online Sales Tax Edges Closer To Reality - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


Online Sales Tax Edges Closer To Reality

Enough state legislatures have signed on to tax-collection system to have it operational next year.

A system that will let states collect sales tax from online purchasers should become operational next year. More than enough state legislatures have passed laws this year to implement the Streamlined Sales Tax Project, said Dianne Hardt, project co-chair and Wisconsin's tax administrator, at a briefing Tuesday.

Legislatures in 20 states, representing about a third of the population of the 41 states participating in the project, have enacted laws to conform with provisions of the tax-collection program. An agreement approved by the states' tax officials last year calls for execution of the sales-tax collection system once 10 states representing 20% of the population of sales-tax-collecting states approve the project.

Though that threshold has been reached, Hardt said, it will take months to verify if each state's law conforms with project standards. She expects the program to become effective either April 1 or July 1.

Many online businesses don't collect sales tax from buyers who live in states where the companies aren't based. Legally, buyers are required to pay a sales tax, known as a use tax, to the state in which they reside, but few do so unless sellers collect the levies. States lose an estimated $200 million a year in uncollected sales taxes from online purchases. The system devised by Streamlined Sales Tax Project establishes processes in which the taxes are collected and distributed to the states.

Businesses have three choices of the technology they can use to collect and disperse sales tax: contract with a project-certified service provider, purchase and deploy project-certified software, or have tax authorities certify a homegrown system.

States participating in the project must agree to the same definitions for taxed items. For instance, fruit juice is defined as a beverage containing at least 50% or more fruit juice. Wisconsin exempts fruit juices only if they contain 100% fruit juice. If the state wants to participate in the project, it would have to agree to exempt fruit juice as defined by the project. Having a single definition for an item makes it easier for businesses serving customers in multiple states to know what to tax.

Though the project has defined for tax purposes most commodities and services, it's still working out definitions for digital property such as downloaded music.

Hardt said businesses will benefit once the tax-collection mechanisms take effect because it will simplify the tax structure, provide greater accuracy for tax calculations, indemnify business from errors, and reduce the scope of potential audits. Because of these benefits, Hardt said, "the business community will put pressure on states that aren't participating to participate."

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
State of the Cloud
State of the Cloud
Cloud has drastically changed how IT organizations consume and deploy services in the digital age. This research report will delve into public, private and hybrid cloud adoption trends, with a special focus on infrastructure as a service and its role in the enterprise. Find out the challenges organizations are experiencing, and the technologies and strategies they are using to manage and mitigate those challenges today.
Future IT Teams Will Include More Non-Traditional Members
Lisa Morgan, Freelance Writer,  4/1/2020
COVID-19: Using Data to Map Infections, Hospital Beds, and More
Jessica Davis, Senior Editor, Enterprise Apps,  3/25/2020
Enterprise Guide to Robotic Process Automation
Cathleen Gagne, Managing Editor, InformationWeek,  3/23/2020
Register for InformationWeek Newsletters
Current Issue
IT Careers: Tech Drives Constant Change
Advances in information technology and management concepts mean that IT professionals must update their skill sets, even their career goals on an almost yearly basis. In this IT Trend Report, experts share advice on how IT pros can keep up with this every-changing job market. Read it today!
White Papers
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Sponsored Video
Flash Poll