Governors Considering Uniform Tax Code for All Commerce

In a response to the widening controversy over Internet sales taxes, representatives from across the United States opened debate on a proposal to simplify state sales taxes at a meeting of the National Governors Association in Atlanta, Georgia.

According to the NGA, the proposed plan will be one that “takes advantage of new software technology to remove the shackles of an outdated, burdensome system.”

NGA Chairman and Utah Governor Michael O. Leavitt has called upon the states to simplify their sales tax systems, making the codes uniform for all types of commerce and businesses. Leavitt has pledged to the federal Advisory Commission on Electronic Commerce that he will shepherd the states through talks to develop a proposal that the commission can incorporate into its final report to Congress next summer.

The Advisory Commission met in New York City earlier this month to publicly lay out the issues that it believes are critical to resolving the controversy over taxation of Internet sales. When the group reconvenes in San Francisco this December, the states and several other groups are expected to have proposals ready for consideration.

State Simplification

Representatives from 23 states agreed to work together over the next five weeks to set a voluntary plan that the NGA says would “sharply reduce existing burdens and liabilities for all sellers in those states and significantly enhance commerce.” The group has not settled on many specifics yet, but it made clear the intention to provide incentives for remote sellers, whether Internet, telephone or catalog marketers, to do business in their states.

Based on Leavitt’s promise to the Advisory Commission on Electronic Commerce, the states must develop a plan that will “radically simplify the existing system of sales tax collection” and will not create any new taxes or discriminate against out-of-state or remote vendors. The plan must also keep state sovereignty in mind and must limit unreasonable audits.

As stipulated by the advisory commission, the states must also ensure consumer privacy and provide for “purchaser transparency.” As the NGA put it, “tax policy should not be a factor affecting the difference in price among over-the-counter, Internet, and mail order purchases.”

State Benefits

Apparently willing to forfeit the chance to raise money through Internet taxes, the NGA argues that the new voluntary sales tax system will save states money by streamlining currently outdated systems. “Creating such a fair and equitable approach to electronic and remote commerce would permit states to use new software technology to dramatically simplify and reduce to a single transaction the collection of sales and use taxes on remote sales,” the NGA said.