Streamlined sales tax merits state's support
2:20 PM 10/12/03

A sales tax system that had standard definitions and procedures applied by every state and local government would ease headaches for consumers, businesses and tax collectors. That's why Wisconsin lawmakers should pass legislation to adopt the changes proposed by the Streamlined Sales Tax Project. <

The goal of the Streamlined Sales Tax Project is to standardize, simplify and modernize the collection and administration of sales and use taxes, now subject to state-by-state variations. It also would smooth the way for the systematic collection of taxes on Internet and catalog sales, which would help Wisconsin collect an estimated $150 million in sales taxes that now go unpaid each year. <

The most significant change proposed by the project is in the definitions of items subject to sales and use taxes. Under the current patchwork, an item that one state exempts from sales tax as "food" might be taxable in another state that leaves the same item off its list of "food." The same variations exist in medical devices, clothing and other items. <

Under the streamlined system, each state would continue to control what categories to tax or make exempt, but the definitions of what belongs in each category would be standard. In other words, if popcorn is "food" in one state, it would be "food" in all states. <

In Wisconsin the new definitions would save consumers about $5.3 million a year. That's because some items now taxed, from licorice to diabetic patient supplies, would move into categories where they would be exempt from sales tax. That savings for consumers would be a cost to the state treasury, but a good bargain nonetheless when you consider the nationwide benefits of less red tape and less confusion. <

Furthermore, the streamlined, standardized system offers an opportunity to eliminate unfairness and, ultimately, to boost state revenue by collecting sales taxes that now escape collection. <

The lack of standard definitions has hindered the systematic collection of sales taxes on Internet and catalog sales, costing states hundreds of millions of dollars. It's estimated that Wisconsin loses $150 million in sales taxes each year because out-of-state Internet and catalog sellers do not collect on products shipped to Wisconsin residents, even though a Wisconsin store would be required to charge a sales tax on the same item. <

The problem is that federal law prohibits any state from requiring out-of-state sellers to collect sales taxes. <

Congress could change the law, but such a change would demand that sellers go through the nightmare of figuring out what items are subject to sales tax in which states. The simplified system would end that nightmare and make it more likely that Congress would change the law so that Internet and catalog retailers are treated the same as brick-and-mortar retail stores. <

Wisconsin has helped to shape the streamlining project. Wisconsin is one of 39 states participating, along with the District of Columbia. An administrator in the Wisconsin Department of Revenue, Diane Hardt, is co-chair of the project's steering committee. <

Now it's up to the Legislature to pass Assembly Bill 547, which would implement the proposed changes. It's time for a streamlined sales tax system.