On June 6th, 2005 Tennessee Governor Phil Bredesen signed legislation that represents a partial victory for the Libertarian Party of Tennessee (LPTN) against the Streamlined Sales and Use Tax (SSUTA).
The Tennessee legislature had previously passed bills that would have made the state a participant in the SSUTA beginning on July 1, 2005. This newly signed legislation, HB2088 in the Tennessee House and SB0731 in the Tennessee Senate, will delay the plan for another two years.
The SSUTA is a 42-state plan designed to help states collect the sales and use taxes on items their residents purchase via phone or Internet from out-of-state companies. LPTN Chair Alicia Mattson says, “In spite of the name, this plan greatly complicates the sales tax collection and reporting for a vast number of businesses in Tennessee, making it more of a burden than it already is.”
Current law in Tennessee says that the sales tax rate collected on a transaction is the rate at the physical location of the business selling the product or service. Under SSUTA, the sales tax rate on the transaction would be based on the physical location where the buyer takes possession of the item. So if a vendor delivers a product to, or does on-site labor in, another sales tax jurisdiction, they have to collect the sales tax rate in effect at the delivery point. The vendor would have to use the customer’s nine-digit zip code to determine the proper sales tax rate to collect. Then the vendor’s monthly sales tax return would have to break down totals in each sales tax jurisdiction to which the vendor delivered products/services.
“It’s not hard to see how complicated and burdensome a system this would be for Tennessee businesses,” says Mattson. Not only would the SSUTA affect in-state sales, but this legislation asked vendors to "volunteer" to collect sales tax on their out-of-state sales as well. Then the vendor would be expected to file a monthly sales tax return with every state they delivered to during that month.
The LPTN launched an informational campaign against the SSUTA, handing out flyers to warn businesses about the upcoming change and to encourage business owners to let their objections be known to the governor and the legislature.
Mattson notes, “Most business owners had no idea whatsoever that this change was coming. Once business owners learned what the state was planning, the governor and legislature were pressured into reacting. We eventually want a permanent repeal of this legislation, not just a two-year delay. But the delay buys us more time to work on a permanent reversal of course.”
For more information:
-about the multi-state SSUTA plan, visit www.streamlinedsalestax.org
-about Tennessee’s SSUTA plans, visit www.state.tn.us/revenue/streamlined.htm
-LPTN’s press release opposing the SSUTA, visit www.lptn.net/news/articles/91/
-LPTN’s informational handouts for business owners, visit www.lptn.org/toolbox
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