National Association of Counties * Washington, D.C.         Vol. 32, No. 18 * October 9, 2000

---

Previous story | Table of Contents | Next story

Sales tax project releases initial
proposals on simplification

---

The Streamlined Sales Tax Project (SSTP) issued a number of draft proposals last month for simplifying and modernizing sales and use taxes.

The SSTP was created earlier this year by the National Conference of States Legislatures and the National Governors’ Association. Thirty-nine states currently are involved in the project, which was prompted by burgeoning sales on the Internet and business complaints about the complexity of sales tax collection. NACo and other local government organizations also have been participating in the meetings of the SSTP.

A public hearing was held in Rosemont, Ill., Sept. 29, on the draft proposals. Nearly 20 businesses and business organizations testified at the hearing and were generally supportive of the state effort.

Witnesses were asked to comment on the following recommendations of the project:

• establishment of uniform definitions within tax bases (food, clothing, etc.) with legislatures deciding what is taxable within the common definitions
• simplification of rates by having common state and local tax bases and state administration of all state and local taxes
• creation of a new, ZIP code-based system for determining local tax rates on out-of-state sales that will gradually move to an address-based system as technology becomes available
• establishment of several technology models that would offer retailers significant administrative simplification and audit protection if they use certified service providers or certified software to collect sales taxes
• creation of simplified standard forms for retailers registering in participating states, remitting sales taxes and processing exemptions, and
• establishment of a uniform rule that relies on location of sale and billing or shipping addresses to source transactions for tax purposes.

Another public hearing on further draft proposals will be held in Chicago on Oct. 26. The hearing will cover product definitions for sales tax purposes and limitations on the frequency of rate changes by state and local governments.

It is being proposed that local governments provide 60 days notice of a rate change and that the change only take effect at the beginning of a calendar quarter.

Officials from the participating states will have a final vote on the project’s recommendations to state legislatures in November. Model state legislation will be drafted and submitted to the states in early December.

Pilot software project begins
In another development, the SSTP software pilot project started on October 1. Four states (Kansas, Michigan, North Carolina and Wisconsin) have contracted with several companies to test the accuracy and effectiveness of using existing software to collect sales taxes. The pilot project will last for one year and will involve companies in the four states who volunteer to participate.