HJR 176: Joint Subcommittee to Study the Impact of Collecting Remote
Sales Taxes on the Economy of the Commonwealth
August 16, 2004
The meeting began
with staff from the Division of Legislative Services providing an overview
of the Streamlined Sales and Use Tax Agreement (SSUTA) that was approved
by state representatives on November 12, 2002. SSUTA is a multistate agreement
with the objective of simplifying the administration of sales and use
taxes. Under the agreement, a remote vendor (a vendor with no physical
presence in a state) who voluntarily elects to participate in SSUTA is
required to remit use tax on goods and services sold to customers in states
in which the vendor does not have nexus for purposes of tax collection
SSUTA was crafted
as a result of working group meetings that included interested businesses
and representatives of 42 states and the District of Columbia. Virginia
first became involved in the working group meetings in 2002. A provision
of SSUTA provides that the multistate agreement will become effective
when at least 10 states comprising at least 20 percent of the population
of states imposing sales taxes are in substantial compliance with the
agreement. It is anticipated that these requirements will be met on October
1, 2005, and the multistate agreement will then become effective.
Staff related that while SSUTA is a voluntary agreement that states and
vendors may join, there have been efforts at the Congressional level to
enact laws that adopt most of the elements of SSUTA but that also permit
state and local governments to mandate or require remote vendors to collect
and remit use tax.
Staff concluded its
presentation by discussing issues under SSUTA that may impact states that
join the agreement. These issues were identified as the requirement that
participating states maintain ongoing substantial compliance with the
agreement; the need for states to adopt procedures to identify potential
legislation that may conflict with the terms of the agreement; procedures
for annual recertification of substantial compliance to the governing
body of SSUTA; administrative costs, including a temporary increase in
the discount paid to vendors voluntarily participating in the agreement;
and, if the Commonwealth were to adopt SSUTA, the likely changes that
would be required to its sales and use tax laws to bring them into substantial
compliance with the agreement.
from the Northern Virginia Technology Council presented some questions
and concerns in regard to SSUTA. The council has five primary concerns:
- SSUTA is a work
in progress with potential changes still to be made and since the agreement
has yet to become effective there is very little to evaluate.
- If the provisions
of SSUTA were to become mandatory, there could be very costly compliance
burdens on technology and other service providers.
- The scope of SSUTA
extends beyond e-retailers.
- Costs and benefits
to Virginia are still unknown.
comparative advantage in growing and attracting technology companies
would erode, nationally and internationally.
As Virginia residents
are subject to use tax on goods purchased from remote vendors, the council
recommended that Virginia focus on enforcing the current tax collection
laws to bolster revenues.
Finally, a representative
from the National Retail Federation (NRF) addressed the joint subcommittee
and encouraged it to recommend that Virginia become a participating state
in SSUTA. NRF believes that the ability of remote vendors to sell goods
without having to charge use tax, especially given the proliferation of
sales of goods over the Internet, places main street vendors
(those not selling over the Internet or in interstate commerce) at an
unfair competitive disadvantage. Because main street vendors must collect
sales tax, it is difficult for them to compete with remote vendors who
do not have to collect and remit use tax on the same goods and services.
NRF believes it is
appropriate that remote vendors collect and remit use tax as they also
benefit from the transportation and police services provided by the states
in which their customers are located. For those states that comply with
the provisions of SSUTA, NRF stated that it is appropriate for Congress
to authorize such states to require remote vendors to collect and remit
use tax. NRF also believes that the burdens placed upon retailers in collecting
sales and use taxes should be eliminated through the full reimbursement
of administrative costs by states.
Hon. Timothy D. Hugo
Division of Legislative Services
of Legislative Services > Legislative
Record > 2004
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