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Streamlined Sales and Use Tax History

Two U.S. Supreme Court cases were instrumental in the ultimate decision to create the Streamlined Sales Tax Project (SSTP). In 1967, in National Bellas Hess v. Department of Revenue, the U.S. Supreme Court found that a state could not require that use tax be collected and paid over by a retailer whose only connection with the state was through a common carrier or the United States mail. Bellas Hess was a Missouri mail order house that did not have any outlets or sales representatives in Illinois. The only contact was through catalogs and occasional nationwide mailings.

In 1992, in Quill Corp. v. North Dakota, this same issue again went before the Supreme Court. The Court ruled that states cannot require remote sellers to collect sales and use taxes, citing the complexity of the many state and local sales tax systems and the complexity in dealing with 45 states and thousands of local taxing jurisdictions that were neither consistent nor uniform in applications and definitions and therefore were regarded as barriers to interstate commerce.

As a result of Quill, it was the states understanding that simplification of their sales tax laws and administration would address the burden on the interstate commerce issue. The Court also said that Congress had the ability to determine whether states’ should be required to collect use taxes on remote sales.

In March 2000, 26 states came together to try to simplify and modernize sales and use tax collection and administration through the creation and implementation of a multistate agreement (SSTP). The purpose of the project was to develop a new, simpler sales tax system that would incorporate principles of uniformity, privacy and technology. The goal was to streamline the tax collection process for vendors, saving compliance and auditing costs, while saving the states administrative costs and increasing voluntary compliance. However, the primary goal of the SSTP was to convince Congress to confer collection authority over remote sales on the states that enact the streamlined system on the theory that the system eliminates the burdens on interstate commerce that had been the justification for denying states that authority.

After much work and numerous meetings, the SSTP’s implementing states came to closure on a final agreement in November 2002. Each implementing state still needed to have its legislature formally adopt the agreement and bring its statutes into compliance. With the completion of the agreement and it becoming operational on October 1, 2005, the Streamlined Governing Board, a permanent organization responsible for administering the Agreement was established. Scott Peterson from South Dakota was appointed full-time Executive Director.

Mr. Peterson appeared before the Commission on November 8, 2007 and gave a presentation on the Streamlined Sales Tax Project. That presentation can be found in Appendix A.

Streamlined Sales Tax Project

In response to the U.S. Supreme Court decision in Quill v. North Dakota, the Streamlined Sales Tax Project is an effort by state government, with input from local governments and the private sector, to simplify and modernize sales and use tax collection and administration. The goal of the Project is to streamline and simplify state tax codes across the U.S. to make them more conducive to the collection of sales tax by out-of-state retailers. A side benefit would be that this type of project will undercut the argument that the Supreme Court has been receptive to in the past that sales tax codes are too complex to require retailers without physical nexus in a state to collect sales taxes.


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