On Tuesday, Senator Mike Enzi of Wyoming is reported to have introduced legislation he calls The Sales Tax Fairness and Simplification Act. The basics of the proposed bill is to have Congress agree to the Streamlined Sales Tax. Although this is still in the very early stages, I welcome the idea of Federal Action and I think the affiliate marketing industry should embrace this. The SSTP or a uniform sales tax is the best possible answer.
SSTP will level the playing field of brick and mortar stores with online merchants. While it is debatable what percentage of consumers purchase online in order to avoid sales tax, it most likely is a factor for at least some. Consumers who do not pay the sales tax at time of purchase are supposed to pay the tax as a use tax, but many fail to do so.
Many States rely heavily on sales tax revenue. As online sales increase and purchases at brick and mortar stores decrease there is an overall decrease in tax revenue. Politicians are very leery of enacting additional taxes. It makes sense to collect a tax that is already due.
One of the major problems with the current system of sales tax is that every state is different when it comes to sales tax. Different items tax at different rates in different states. In fact, within any state there may also be assorted county and or local sale tax on top of the state sales tax. (Personally, I think Hawaii has the right idea with an excise tax as opposed to a traditional sales tax.) The current sales tax systems in many states make it difficult for a merchant to comply with collecting a tax on sales to out of state residents. The SSTP aspires to set a uniform tax system, reducing the burden on merchants. Adopting a streamlined uniform tax system however is very complex.
Many States will have to significantly adjust; adopting new lists of taxable and non-taxable items, new tax rates, and elimination of additional city and county sales taxes. It is a drastic change that will likely take a couple of years. As I mentioned in an earlier post, New York indicated in their budget memo that they are exploring the SSTP but admit the changes would not be easy.
Senator Enzi is well qualified to take on this issue. His education includes a B.A. Accounting and M.A Retail Marketing, and he is a proponent of small businesses. He realizes that the burden placed on out of states merchants to collect sales taxes under the current system and his support of a unified sales tax is welcomed by many in our industry. Senator Enzi is probably about to gain many supporters from the affiliate industry.
I’ll be following this proposed legislation and will update on any movement. See Senator Enzi bill – Sales Tax Fairness and Simplification