FOR IMMEDIATE PRESS RELEASE BY THE LIBERTARIAN PARTY OF TENNESSEE
SSUTA "more scheme-lined than streamlined"
February 24, 2005
Cookeville, Tennessee
For as long as the Internet has existed, governments have been plotting how to tax it. And hold onto your wallets because they have a new plan on the table!
The new plan is called the Streamlined Sales and Use Tax Agreement (SSUTA), and it's a mechanism that 42 states and the District of Columbia hope will allow them to collect sales and use tax on interstate transactions via the Internet, mail, or phone.
Many business owners have no idea that it's coming, though it will require dramatic changes in how some businesses calculate and report sales tax even for in-state transactions. So the Libertarian Party of Tennessee (LPTN) is launching an informational campaign to alert business owners in the participating states and to try to convince state lawmakers to reverse course before the new Tennessee laws take effect on July 1, 2005.
States participating in the SSUTA spin the plan as something that will "streamline" the collection of sales taxes so that "businesses can more easily comply with" more uniform sales tax laws in different states. But the reality is that the SSUTA will make sales tax collection much more difficult and burdensome for many businesses, making the process uniformly complex in all participating states.
"It's more scheme-lined than streamlined", says Alicia Mattson, LPTN Treasurer. "State governments want businesses to invest the time and money it takes to dig the spare change out of the couch cushions of American consumers."
Businesses in participating states will have to comply with this plan for in-state transactions, but states can't force their in-state businesses to collect out-of-state sales taxes. So under the SSUTA each of the participating states will offer incentives for its in-state businesses to "volunteer" to collect sales tax on out-of-state transactions and send a monthly return to each state for which tax was collected. And if a business does not volunteer, the state may require the business to provide certain out-of-state transaction details with their monthly sales tax returns. That information can be passed on to the other states so they can collect their own use tax from the buyer.
Even if a business doesn't volunteer to collect out-of-state sales tax, the in-state sales tax reporting will change. Under the SSUTA requirements, sales tax will no longer be based upon the location of the seller, but upon the zip code where the buyer takes possession of the purchased item/service. So if a seller delivers materials/furniture/pizza, ships an item sold on eBay, performs onsite repairs, leases equipment, etc., into another sales tax jurisdiction, the seller will have to calculate the sales tax rate based on the customer's delivery point zip code. Then when the seller files his monthly sales tax return, the seller will have to itemize how much of the sales were in each sales tax jurisdiction.
Mattson, who is also a small business owner, says, "It takes enough time as it is to file a monthly sales tax return to one government for one sales tax rate. If a business ships to or works in hundreds of counties within a month, it's not hard to see how much more complex and burdensome monthly sales tax returns will become."
To administrate this plan across 42 states, there will be a centralized agency to oversee tax law uniformity in the participating states. Mattson points out, "The question of how much authority will be granted to this agency is cause for great concern. The Tennessee Department of Revenue was unable to tell me if this agency will have any auditing authority. It is just asking for accountability problems to create an agency with a tax administration role when that agency is not elected by voters, and it is not under the control of any single government. This would be like granting a sales tax administration role to the United Nations."
"This plan was developed because the states are unhappy with the federal government's moratorium on Internet sales taxation, so these states are trying to work around the federal government. But the U.S. Constitution grants the right to regulate interstate commerce to the federal government, not to some other third-party organization created by the states. The participating states are essentially usurping the federal government's authority."
The SSUTA states argue that this system is needed to even the "unfair" playing field for traditional brick-and-mortar sellers who collect sales tax, but they also must compete against Internet sellers who only collect sales tax on in-state transactions. Mattson claims "This argument is more hype than reality. Buying from a brick-and-mortar seller offers other benefits not available online - benefits like the ability to touch the product before you buy it, no shipping costs, easy access to store managers for problem resolution, and after-the-sale service options. Internet sellers are much more frequently the victims of credit card fraud that costs them in stolen merchandise and much higher credit card fees, but no governments are trying to even this part of the playing field in the name of fairness. And Internet sellers will also have to collect sales tax on the shipping fees they charge, which will put them at a sales tax disadvantage to brick-and-mortar companies."
Mattson notes several other negative side effects from a state participating in the SSUTA:
1) "The additional complexity of monthly sales tax returns may put some Internet-based companies out of business, which will reduce competition and limit choices for consumers. Some hard-to-find items are only available on the Internet because they have small, but wide-spread markets. Jeopardizing the existence of the businesses that offer these products will be harmful to the economy."
2) "The SSUTA will remove some flexibility for a state to set reduced tax rates on selected types of goods and services. If a state wants to customize a tax rate for something like clothing or school supplies, they can't do it unless all the other participating states do it, too."
3) "Governments in some tax jurisdictions are starting to realize that they will actually lose revenue under the SSUTA rules. Companies who deliver goods/services outside their tax jurisdiction will now send collected sales tax revenues to those other jurisdictions instead of to their own county. And we all know that governments will never be happy with less income, so they'll simply raise property taxes to offset the revenue loss."
Mattson summarized her opinion of the plan saying, "Government already takes nearly half of the average American's income by various taxation systems. It is clear that some politicians won't rest easy until they have the other half, too, and until business owners are the full-time employees of the state."
For more information about the national SSUTA project , visit www.streamlinedsalestax.org.
For information specific to the state of Tennessee, visit www.state.tn.us/revenue/streamlined.org
The Libertarian Party of Tennessee can be contacted by phone at 1-888-960-1776.
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