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Senator Enzi Pushing for Federal Action

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

{ 3 comments… add one }

  • Franklin Banker April 6, 2009, 10:48 pm

    We have to get active in our political process. Contact senators and representatives and give them your opinion of the destruction this is going to bring to our industry.

    Once all the states have done this, and all affiliates have been fired, then what? Isn’t this kind of plain and obvious to all affiliates?

    I think someone should do a study on the difference between the money gained by a state, and the money lost when the residents go out of business because of the law.

    So, in NY there must be a myriad of affiliates. What is their combined state income tax liability? Add to that the combined purchases of those affiliates where they do pay the sales taxes (cars, computers, houses, ipods, wax paper) and then compare that figure to the net sales tax gain NY is really going to get after all the affiliates are fired.

    Is the state really going to gain that much? Is there anyone smart enough in our industry to do the study, and then march it down to the state capitals considering this kind of legislation?

    How dumb can the politicians really be? We have to write letters right now. This is a chilling trend we are seeing man!

  • Franklin Banker April 6, 2009, 11:10 pm

    Sorry to be so irritated, but I was mainly commenting on the trend of states enacting the type of legislation NY did. I was not commenting on the proposal Senator Enzi has made. Actually the Federal approach would be far better than watching our industry be eliminated slowly as each state passes the same type of bill.

    We must support the Enzi approach, which should stem the tide of state by state legislation, at least I hope it would.

    If such a bill were to pass, how would it affect the NY law already in place? There are 4 or 5 other states considering the same kind of laws.

    This Enzi proposal is the only ray of sunshine so far in the scheme of things for affiliates living in the affected states. Let’s support the effort, and then the industry could adjust to a standardized system.

  • Richard Hofrichter April 17, 2009, 9:59 am

    Without putting out my feelings about the politics of this, it is important to point out that SSTP does NOT get rid of the varying local tax rates. While it DOES try to establish uniform TAXABILITY of a given item (anything subject to the STATE sales tax is also subject to any county, city, or district tax rates), it still does allow for each and every city, town, county, and special purpose district (like transit or stadium districts) to still impose their own varying tax rates on top of the state rate. As such, even with SSTP there are still potentially thousands of different tax rates in a state, and over 10,000 in the 50 states, even if SSTP was adopted. Just a correction of a statement in the article – SSTP will NOT require the elimination of the various county, city, and district tax rates. The only thing it does is require state administration of those taxes, whereas now in some states like Alabama, Colorado, and Louisiana, many of these local taxes are actually sent to (and administered by) the locality or a private collection agency.

    This requires a seller to all locations in Alabama, for example, to remit possibly hundreds of tax returns per month just in that state alone. Now you can see why many businesses are resistant to collecting these taxes all over the country, as they could be required to file over 1,000 tax returns per month if they registered in every locallity and state. How’s THAT for going green? Imagine all those pieces of paper and documents being mailed, that require fuel to deliver, that would waste.

    And by the way, New York has NOT signed on to the SSTP.

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