Online shoppers could begin paying sales taxes on out-of-state purchases as early as next year, and businesses large and small could get a cut for collecting the money.
Kansas Department of Revenue Secretary Joan Wagnon and her group, the Streamlined Sales Tax Governing Board, have been searching for a way to get businesses to collect sales taxes when they sell goods to customers in other states.
Currently, businesses are not required to collect sales taxes from buyers out of state. But with Internet sales spreading, cash-strapped states are missing out on millions in possible revenue.
A study conducted by the University of Tennessee last year estimated Kansas was losing as much as $81 million annually in uncollected taxes from out-of-state businesses.
Last month, Wagnon's group helped solidify a pact between 19 states, including Kansas, agreeing to search for incentives to persuade businesses to collect the taxes. The states that signed the streamlined sales tax pact would collect taxes from other states and, using tax statements, send the cash back to the states where the sales were from.
"There are huge dividends down the road. Huge," Wagnon said.
Currently, rulings in two U.S. Supreme Court cases forbid charging out-of-state taxes, mainly because of the cost it would inflict on sellers trying to collect unfamiliar taxes and funneling the cash back to the right states.
Some small business owners said collecting the money would cost them both cash and time, not to mention removing an incentive for out-of-state customers to shop with them online.
At J. Hood Booksellers, a former store-front business that went entirely online five years ago, Gloria Hood ships books around the country daily. If she had to figure and charge customers other state's sales taxes, she said, her business could suffer.
"It's an undue burden on a business owner to do that," she said.
Diane Meredith, who owns The Dusty Bookshelf stores in Lawrence and Manhattan, said she couldn't imagine having to worry about other state taxes when she ships books outside of Kansas.
"The last thing any of us need in the small business world is more complications," Meredith said.
To help sellers, Wagnon and the board's executive director, Scott Peterson, have proposed incentives for businesses in the 19 states, including giving sellers a cut of the taxpayer money they collect.
Peterson said that a study to find out the needed percentage was nearly complete, but the details of the study, including the exact percentage retailers might receive, wouldn't be made public until the end of the year.
Regardless of the exact percentage of tax money available for businesses, the more they collect, the more cash they would receive. That means large merchants, such as Target or Wal-Mart, stand to gain tens of millions of dollars in taxpayer money for complying with the program.
Peterson said the proposal would also account for the logistics of collecting unfamiliar taxes, assigning certified service providers to help companies calculate and collect taxpayer money.
Seven companies have offered to collect the cash, and Peterson said the forthcoming study would also analyze their ability to accurately charge a plethora of local and state taxes from the 19 states.
For the remaining states that charge sales tax, a more permanent mandate could be on the horizon. A U.S. Senate bill expected to go through Congress would require retailers to charge Internet and mail order customers other states' sales tax when it applies.
A similar federal bill failed in 2003 and 2004, and Peterson said that opponents who believe the plan is too complicated and intrusive would be out in force again.
But Wagnon said that the current multistate pact, and her group's plan to help retailers pay for the service, could show Congress that a streamlined sales tax works for states that need the cash and retailers that collect it.
"Every time we make progress, it gets closer to being a possibility," Wagnon said.