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AMES, As national retail sales return to pre-recession levels, Ron Prescott, ISU, Extension and Outreach small business and retail specialist says that the time has arrived to bring multi-state sales tax collection into the 21st Century.
Prescott says that according to the US Census Bureau, 2012 retail sales totaled $4.2 trillion, of which 5.4% were transacted online. E-commerce, as a percentage of retail sales, has steadily increased over the past twelve years. Today, 65% of retail shoppers own either a smartphone or tablet, which provides a pretty positive growth projection into the future.
Since the 1967 US Supreme Court ruling (Bellas Hess), states have been aware of the need to simplify the process of multi-state sales tax collection. Even though sales tax collections are required for online purchases within those states that have sales tax, the US Supreme Court ruled that the process of collection would be too difficult for any vendor to comply with. Forty-six years later, technology has provided the means to create a streamlined sales and use tax system. On July 1, 2005, Iowa was granted full membership within the Streamlined Sales and Use Tax Agreement, and will be prepared to enact the sales tax collection process within 90 days of President Obama’s signature of the Market Fairness Act of 2013. Currently, approximately 300 Iowa retailers are voluntarily collecting taxes from online sales, and transmitting funds to the Iowa Department of Revenue because they believe it is the right thing to do.
The Market Fairness Act of 2013, Senate Bill 336, was introduced to the Senate on Valentine’s Day by Senator Harkin and 18 of his colleagues. The bill is designed to restore states’ sovereign rights to enforce state and local sales and use tax laws, and currently favors bipartisan support in both the House and Senate. Prescott says that there are some components of the current bill that may be of interest to Iowa retailers, including:
- Free of charge software for remote sellers, which calculates sales and use taxes due on each transaction at the time the transaction is completed, files sales and use tax returns, and is updated to reflect rate changes. This component of the bill was added to reduce the seller’s cost of implementing the multi-state tax collection process.
- Small seller exemption – Collection is required if the remote seller has gross annual receipts in total remote sales in the US exceeding $1,000,000 per year.
- No new tax has been imposed, but only the enforcement of an existing tax law.
- For more information with regard to Iowa’s Streamlined Sales Tax Project visit: http://www.iowa.gov/tax/educate/SLST.html
Prescott says that many online shoppers are not aware that sales tax is due on most of our online purchases, and that there is an option for the purchaser to manually submit those taxes that are due to the Iowa Department of Revenue. Estimations of revenue that Iowa is not currently collecting from online sales are more than $30 million. He concludes that with minimal administrative costs to implement this program, the passage of the Market Fairness Act of 2013 is seen as a positive move by most governors in the United States.
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