States act on remote sales tax.

• Author: Frazzini, Kevin
• Position: TRENDS

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Frustrated by Congress' unwillingness to act on remote sales tax collection, a group of lawmakers, with support from the National Conference of State Legislatures, is encouraging states to take action in their own legislative chambers to solve the problem.

At issue is the unfair tax advantage out-of-state retailers have over brick-and-mortar shops. The Supreme Court ruled in a 1992 case that a state cannot require out-of-state retailers to collect sales taxes from consumers unless the company has either property or employees in the state. The court reasoned that it was too complicated for sellers to comply with the various sales tax systems of every state where they made sales.

States responded with the Streamlined Sales Tax Project to simplify and modernize sales and use tax administration among the states. To date, 24 states have signed on to the project's Streamlined Sales and Use Tax Agreement, which has collected more than $1 billion from voluntary sellers since going into effect in 2005.

Still, the revenue lost is substantial. In 2008, states went without an estimated $18 billion in uncollected taxes from out-ofstate sales, $7.7 billion of which were from online sales, according to NCSL research. That figure climbed to about $23 billion in 2012, with almost half of that coming from Internet transactions.

The Marketplace Fairness Act of 2013 would have closed the tax loophole by providing states that complied with certain simplification requirements the authority to collect the taxes they are owed. The U.S. Senate passed the measure by a substantial bipartisan margin. But because of opposition in the U.S...