States consider ‘streamlined’ sales tax

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(Host) It’s likely that the Legislature will be asked this winter to give its approval to a streamlined sales tax plan that will allow the state to collect revenues from mail order and Internet companies. The proposal, which could bring the state millions of dollars in new revenue, would require some important changes to Vermont’s sales tax law.

VPR’s Bob Kinzel reports:

(Kinzel) At a time when many states are facing severe fiscal problems, a group of 35 states including Vermont is working on a plan that could provide them with a lot of new revenue. The untapped source of money is purchases made from mail order and Internet companies.

Currently states can only impose their sales tax on these purchases if the company has a physical presence in the state. Under the so called “streamlined proposal,” the companies would agree to impose individual state sales taxes in return for a greatly simplified sales tax system. This is critical because currently there are 7,000 different state and local sales tax jurisdictions across the country.

George Phillips, who works at the Vermont Tax Department, is the state’s representative in these negotiations. Phillips says the states are interested in the plan because of the possibility of new revenue and the companies are interested because many of them want to expand their operations to include new stores in a number of states. That’s a move that would require them to collect sales taxes from all consumers in the state and the streamlined plan makes that job much easier.

Phillips says the agreement also requires states to adopt uniform rules concerning the sales tax:

(Phillips) “One of the rules is there cannot be a cap or a threshold on an exemption. So we could not have, as we have now, an exemption for clothing of $110 or less. We would have to either tax all clothing or exempt all clothing.”

(Kinzel) Phillips says the key question facing lawmakers is whether the money that could be gained from taxing mail order and Internet purchases will offset any potential losses from changes to the Vermont sales tax code:

(Phillips) “Any time you’re making changes to the sales tax structure the changes are going to impact the people. And the Legislature would have to sort all of those out as to whether they were willing to do those, or how they were willing to do them if they were.”

(Kinzel) The new streamlined sales tax plan can go into place as soon as 10 states ratify the agreement. Phillips says this could happen by the spring so it’s likely that lawmakers will consider the plan in the next few months.

For Vermont Public Radio, I’m Bob Kinzel in Montpelier.

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