Streamlined Sales Tax Proposals Released.

• Author: Duncan, Harley T.

States working to devise a simplified sales and use tax system for nationwide adoption unveiled a set of working proposals in September 2000. The Streamlined Sales Tax Project, which has been meeting for the past seven months, represents a major effort by state governments to design, test, and implement a simplified sales tax collection system that addresses sales tax compliance and administration issues arising from traditional and electronic commerce transactions.

The Project is composed of a steering committee and work groups addressing four broad substantive areas:

* Tax Base and Exemption Administration

* Tax Rates, Registration, Returns, and Remittances

* Technology, Audit, Privacy, and Paying for the System

* Sourcing and Other Simplifications

Thirty-nine states, plus representatives from local governments, are participating directly in the Project. In addition, the work groups invited private-sector representatives to participate in the meetings, review work products, and provide feedback on various proposals. Similarly, the steering committee engaged in discussions with retailers, retail trade organizations, and other interested parties.

The key features of a streamlined sales tax system include:

* Uniform definitions within tax bases.

State legislatures will still determine whether items are taxable or exempt, but will employ nationally uniform definitions for ease of classification of the items.

* Simplified exemption administration for use-and entity-based exemptions.

Sellers will be relieved of the "good faith" requirements under current law and will not be liable for uncollected tax. Instead, purchasers will be responsible for supplying correct exemption information and will also be liable for underpayments arising from erroneous exemption claims.

* Rate simplification.

States will be responsible for administering all state and local taxes and paying the local tax component to the local governments. A state -- and local governments within the state -- should adopt common tax bases and accept responsibility for providing notice of rate and boundary changes. States will also be encouraged to simplify their state and local tax rates and be responsible for providing accurate information permitting retailers to match addresses within the state to the appropriate local tax rate. Retailers relying on the state-supplied data will be held harmless for errors.

* Uniform sourcing rules.

The states will adopt uniform sourcing rules for...