Archive for Saturday, April 22, 2006

Retailers wary as plans advance for online sales tax

April 22, 2006


The state of Kansas is moving closer to starting a system with 18 other states to collect sales taxes from online retailers.

"We're hoping to get that wrapped up in the next month or two," Richard Cram, director of policy and research for the Kansas Department of Revenue, said in early March.

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 out-of-state buyers. But with Internet sales spreading, cash-strapped states are missing out on millions in possible revenue.

A study conducted by the University of Tennessee in 2004 estimated Kansas was losing as much as $81 million annually in uncollected taxes from out-of-state businesses.

In November, Wagnon's group helped solidify a pact among 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 made.

"There are huge dividends down the road. Huge," Wagnon said in December.

SACS Distributors, a Eudora company that uses eBay to sell a variety of products - everything from tools to movies to makeup - isn't interested in having to collect the taxes.

"I'd rather avoid the whole thing," said Chaz Chaffin, one of SACS' owners. "It would affect us greatly. Being able to track (differing tax rates in different states) would be a royal pain in the neck. We do quite a bit (of business) each day - to know each rate and keep up with it would be very costly for us."

Christine Peebles, a Lawrence resident who runs the Holy Yogi online store selling items from India and Nepal, agreed. Ninety-five percent of her sales go out-of-state.

"That would be time-consuming now," she said. "My system isn't set up for that. It would be difficult."

But Cram said the 19-state coalition was looking for software vendors to develop technology that would make such transactions easier to track without burdening online retailers. The software would calculate sales taxes based on the shipping address.

"It eliminates a big headache for them," Cram said of retailers.

There is no law forcing retailers to collect the taxes. But Cram said big retailers, especially, would participate in a tradeoff that would get the 19-state coalition to standardize many of their business rules, streamlining paperwork and red tape for multistate businesses.

"There's nothing forcing them to do it," Cram said. "There's no hammer, probably until Congress would get involved. But there are a number of the larger retailers that have been enthusiastic about this project."

Federal bills that would create an Internet sales tax system have failed repeatedly in recent years.

Staff writer Ron Knox contributed to this story.


gr 12 years ago

"Ninety-five percent of her sales go out-of-state."

95%! Doesn't anyone see that Kansas is missing out on something?

Instead of this crazy, resource intensive, and unfair taxing a customer's destination which is unlike anything else in retail, why not tax the customers at the business location's rate?

Keep it simple. If 95% of someone's customer's is out of state, that suggests Kansas may be attractive to businesses. Why should the state put forth the effort of being attractive to business and then losing out on the sales tax?

It's kind of hard to put controls on other state's businesses, but much easier to control in-state business. Why not have each state collect sales taxes on their sales and send it to the state? No unfairly charging different customers different prices. No problem trying to send it to different states. And, no missing out on taxes that should go to Kansas.

Imagine that. Kansas collects sales taxes on Kansas businesses. Missouri collects sales taxes on Missouri businesses. Each state collects their own sales taxes. Unless someone thinks Kansas is hostile towards businesses but still wants money from other states.

Very simple solution. Problem solved. But, it's probably too easy and won't be done.

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