Merchants in 13 States Begin Charging Online Taxes

Matt O'Conner
WASHINGTON — On Oct. 1, merchants in 18 states began voluntarily charging taxes on Internet purchases based on guidelines laid out in the Streamlined Sales Tax Project (SSTP), a cooperative effort by 44 states and the District of Columbia to recover revenue that has traditionally been lost due to the complexities of differing state and local tax codes.

More states are expected to come on board when organizers of the project make available software that will automatically add taxes to purchase totals in compliance with the SSTP. Taxes will be based on the buyer’s location rather than the seller’s.

Under the SSTP, which goods and services are taxed will be left to the discretion of individual states. Also, participation is still mandatory on the part of retailers — although those who do not participate have been warned that they may be held liable in the future for uncollected taxes.

On the federal level, Sen. Blanche Lincoln, D-Ark., introduced legislation in July that would impose a 25 percent excise tax for all adult transactions. Rep. Jim Matheson, D-Utah, simultaneously introduced a version of the bill in the House. However, no individual states have indicated that they will target website memberships as part of the SSTP tax push.

Many Internet businesses have argued that they should not be liable for state taxes in states where they have no physical presence.

Another argument against the possibility of taxing online businesses lies in a 1992 U.S. Supreme Court ruling that said it would be unduly burdensome to expect online entities to calculate sales taxes for different states. The SSTP has attempted to nullify this argument by developing a program that computes taxes for each sale based where the purchaser lives.

Congressional leaders have promised to follow up with federal tax codes on online businesses once the SSTP gains wider adoption and can be used as a model for federal law.

States already in full compliance with SSTP include Indiana, Iowa, Kansas, Michigan, Minnesota, Nebraska, North Carolina, North Dakota, Oklahoma, Kentucky, South Dakota and West Virginia. States in partial compliance that are associate members of SSTP include Arkansas, Wyoming, Ohio, Tennessee, Utah and Nevada.