Wednesday, April 02, 2003
April's Governing Magazine has a short article on online sales tax (unfortunately, I can't find the article online). This has been a hot topic for many years, but its quietly slipping into reality. An anonymous band of retailers, which reportedly includes Wal-Mart, Target, and Toys 'R' Us, has struck a deal with 37 states in which they have agreed to to begin collecting sales tax online. They've avoided this in the past by making their online businesses separate business units but the states aren't buying it anymore and they are increasingly beginning to merge the activities of their brick and mortar stores with the online stores.

This has been an issue that has stirred lots of controversy and lots of rumors over the past several years. Governor Leavitt of Utah has long been an advocate of solving the online sales tax dilemma. States rely on sales tax and they don't like seeing a large portion of it not being collected. Many have mistakenly thought of this as a new tax, but its not. Its simply the collection of a tax that citizens of these states were obligated to pay anyway. People are so used to having sales tax collected by someone else that they think they don't owe it if its not applied at the point of purchase, or nexus. That's not true.

Thirty-four states signed an agreement in November to streamline and simplify their sales tax systems to create a kind of nationwide norm so that the burden of collecting this tax is not as heavy. It will still need to be approved by state lawmakers and that's an uphill battle. Nothing a legislator likes better than mucking with the tax code. Interestingly, Wal-Mart reports that online sales have not been impacted since they started collecting sales tax in February.  

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