Sales taxes, simplified

Thirty-four years ago the Supreme Court informed states that they could not force out-of-state sellers to collect and send them sales taxes. Since then, states have looked for ways to get the lost revenue from these purchases, a problem that grew worse when Internet sales joined catalogs and tax-free shopping, if congressional debate is to be believed, became a deeply cherished American tradition.

A second Supreme Court decision, in 1992, gave state lawmakers direction on where to find a solution to this problem. In upholding its previous decision, the court said in Quill v. North Dakota that the hundreds of various sales taxes among and within states constituted an undue burden on remote sellers and on interstate commerce. Now states beginning this year are changing their tax systems to reflect the way people are shopping. It is an issue Maine lawmakers should follow closely.

States are reviewing two similar proposals for simplifying sales and use taxes, one from the National Conference of States Legislatures and another from the Streamlined Sales Tax Project, made up of state officials. The two proposals are similar enough for Maine not to worry about which plan to back but instead to begin debating how their common points could be used here. Those include one-stop registration for sellers, uniform administration and audit procedures, simplified tax returns and uniform state and local tax bases.

These changes remove the complaint from e-retail sellers a few years ago when Congress passed a moratorium on Internet sales taxes. Never, said the same people who depend on high-speed computers to sort out a huge amount of data instantly to make Internet sales work, could states figure out how to tax goods sold by computer.

Would the tax be applied where the purchaser used the computer? Where the seller was based? At the point from which the good was shipped? Actually, this never was that complicated a question, but as long as states and local jurisdictions had different levels of taxes, it at least offered the pretense of an argument.

Under the simplified tax proposals, with their uniform bases, that argument is essentially gone, and a store that is no more than a warehouse and some telephone operators would be held just as responsible for collecting taxes as the downtown merchant who has been responsibly collecting them for decades – and losing out to catalogs and, more recently, the Internet because of it.

Maine is among the 32 participants in the Streamlined Sales Tax Project. Now that eight or 10 states have passed one of the two simplification proposals, it should figure out how it too could use these proposals and be ready to provide a simpler tax system for all sellers and a fairer one to local store owners who have been collecting taxes through the old system all along.