National Association of Counties * Washington, D.C.            Vol. 31, No. 21 * November 8, 1999

---

Previous story | Table of Contents | Next story

NACo leaders briefed on workings of Internet tax plan

By Ralph Tabor
associate legislative director

---

NACo President C. Vernon Gray and former NACo President Randy Johnson met last week with leaders of other state and local government organizations to discuss a new streamlined sales tax collection plan.

The plan will be presented to the Advisory Commission on Electronic Commerce by Nov. 15 and will be discussed by the commission at its Dec. 14 and 15 meeting in San Francisco.

Among other tasks, the commission is charged with looking at ways sales taxes could be collected on goods ordered through the Internet.

Utah Gov. Mike Leavitt, chairman of the National Governors’ Association (NGA), briefed the state and local leaders about the plan and urged their support.

“The proposal’s key tenet,” stated Leavitt, is to achieve significant simplification of sales tax systems to match the rapid evaluation of information technology and global trade.”

Leavitt indicated that the new streamlined sales tax collection plan meets all of the criteria established by the commission in evaluating sales tax proposals.

The proposal would use new software technology that allows states to collect sales and use taxes from mail-order, interstate and Internet sellers. The system would be completely voluntary to states and remote sellers. The aim is to achieve equity for Main Street merchants and to treat all remote sellers the same. No congressional action would be needed.

A central element in the proposed new system is a state clearinghouse or “trusted third party” to administer the system.

A competitive bidding process would be used to select the trusted third party clearinghouse. Using available software technology, the clearinghouse would provide tax information to sellers and customers at the time of sale.

The clearinghouse would arrange with credit card payment processors to have taxes remitted to the clearinghouse and then transmit the taxes to the appropriate state.

To ensure privacy, the clearinghouse would not receive personal identifying information about the customer.

Individual names and street addresses would not be sent to the clearinghouse. Addresses would be converted to a “geo-code” (i.e. taxing district identifier) to determine the taxes due.

The only obligation imposed on a participating merchant would be to integrate its system with the software used by the clearinghouse. States would reimburse merchants for the cost of this software.

The merchant would not be responsible for making tax determinations or handling state and local tax money. The merchant also would not be subject to tax audits by the states.

NACo has been asked to work with NGA and the National Conference of State Legislatures to develop model state legislation and interstate agreements prior to the 2000 legislative sessions in participating states. The number of states wanting to participate initially will be determined over the next two months.

It is anticipated that it will take a year after state legislation is passed to implement the new system. The earliest start-up date would be July 1, 2001.