The streamlined sales tax agreement: what it means for business.

• Author: Collins, Charles

To modernize tax administration, it is necessary to simplify the complex rules and regulations that exist today. In some cases, it is not possible to achieve true simplification; where simplification is not possible, the goal must be uniformity. Combining simplifications with the certainty brought by uniformity, technology can be used to create a system that is more reliable, simpler, and less costly to sellers. A modern, technology-enabled system can also bring an improvement in tax compliance.

In November 2002, 31 states took a giant step forward in the effort to simplify the administration of sales and use taxes. At a meeting in Chicago, state delegates approved the initial provisions of an interstate agreement for sales and use tax administration. Through their respective delegates, 30 states voted to approve the provisions. One state abstained, ostensibly because it disagreed with one provision of the agreement--the requirement to adopt one rounding rule by 2006.

State legislators will now consider whether they should enact the provisions that are contained in the agreement. This process has already begun, and many observers feel at least 10 states with 20 percent of the country's population could have legislation in place by summer 2003. Until the states enact these provisions, businesses will not reap any actual benefits, but the importance of the step that the states took last November should not be overlooked. Specifically, sales and use tax provisions were crafted by tax administrators and business professionals and approved by a body consisting of tax administrators, legislators, and representatives from the business community. To obtain consensus among delegates representing 30 states is no small feat. Indeed, it is arguably a victory in itself.

Businesses Stand to Gain Significantly

With enactment of the proposed provisions, businesses of all sizes and across all industries, especially multi-state sellers, stand to gain significantly. The provisions offer many of the simplification principles that businesses have sought for years.

* The provisions offer existing taxpayers a more modern tax collection system that provides more simplification and uniformity, coupled with a greater use of technology.

* The provisions provide a simple voluntary solution for sellers not collecting today that wish to expand their business in areas where they are not currently required to collect tax.

* For businesses concerned about the cost of...