On September 25th, Representatives Ernest Istook (R-Oklahoma) and William Delahunt (D-Massachusetts) held a press conference with state lawmakers and city leaders on the introduction of legislation giving states the authority to collect state sales and use tax from out-of-state sellers. Also present at the press conference were organizations representing retailers, small businesses, counties, cities and state legislators.

The legislation, which has bi-partisan support in both chambers of Congress, has not yet been formally introduced. Many states and localities have long clamored for legislation permitting states to collect sales and use taxes from remote sellers. Currently, states lack the authority to collect such taxes from out-of-state sellers. Upon passage of this legislation, all states that simplify their sales tax system and comply with the ‘Streamline and Use Tax Agreement’ adopted in November of 2002, would be able to require remote sellers to collect and remit sales and use taxes. States that want to join the multi-state compact would have to implement uniform simplification standards and a uniform sales tax code that is the same for both Internet and non-Internet retailers.

The followed organizations have endorsed the proposal: the E-Fairness Coalition, National Governors Association, National League of Cities, National Council of State Legislators, National Association of County Officials, National Association of Real Estate Investment Trusts, International Council of Shopping Centers, National Retail Federation and the International Mass Retail Association.

Representative Istook commented that the bill will help local communities solve their own problems by allowing them to boost revenues. To placate small business advocates, Istook maintained that the bill would exempt businesses with total gross sales of under $5 million from having to collect sales tax. Also, retailers will be compensated for costs related to collection of out-of-state sales taxes.

Congressman Delahunt, who emphasized the bi-partisan support for the legislation, stated that the bill is not a tax increase, but rather a simplification and streamlining of our current tax system. Delahunt stated, “the bill treats remote sellers like Main Street sellers by removing the inequities and unfair advantages that remote sellers currently have.” Additionally, Delahunt feels the legislation will allow states, most of whom need fiscal relief, to better rely on sales tax for a source of revenue. Delahunt mentioned that his home state of Massachusetts lost $271 million in sales tax revenue in 2001 because remote sellers failed to collect and remit Massachusetts state sales tax.

Pennsylvania State Representative David Steil (R-31), speaking on behalf of the National Council of State Legislators, asserted that state sales tax revenues are decreasing because of changes in our economy. Steil added, “Congress has the chance to provide fiscal relief to the states without actually affecting the federal treasury.”

Spearheading the effort in the Senate are Senators Byron Dorgan (D-North Dakota) and Mike Enzi (R-Wyoming), both of whom were unable to attend the press conference. However, in a statement sent out before the press conference, Dorgan said “this bill has two goals – first it encourages state and local governments to pursue sales and use tax simplification. Secondly, once they’ve done that, it authorizes them to collect taxes already due.” Enzi also made some comments before the press conference. The Wyoming Republican stated that “this bill would help spur economic growth in communities across the country because sales tax revenue helps pay for our schools, police officers, firefighters and more. Streamlining the sales and use tax system should make it easier for both online and Main Street businesses to comply with the complicated tax system. The resources that are now spent on compliance could then be used, among other things, to hire new people and buy new equipment.”

Commenting on the prospect of bill action before Congress adjourns this year, Ernest Istook told reporters that consideration of the bill would most likely have to wait until early next year. However, Istook thinks the bill has the requisite votes for passage and is convinced that there are plenty of Republicans in the House who will support the legislation. Istook also said that the White House has yet to outline a position on the bill, though, the Oklahoma Congressman is in talks with the President’s staff on this issue.