States Line Up For Voluntary Internet Sales Tax ProgramStates Line Up For Voluntary Internet Sales Tax Program

The effort to unify the collection of sales taxes for Internet purchases is moving toward an important milestone at the end of June, when the Streamlined Sales Tax Project (SSTP) is scheduled to certify the first states as full members of a voluntary program to collect the Web taxes.

The participating states in the voluntary program will be the vanguard of a movement that is planned to eventually become a mandatory national program with some federal oversight. State and local taxing jurisdictions have complained that they are losing more than $15 billion in Internet sales taxes that are not collected.

To date, attempts to unify states and other taxing entities has proven to be more difficult than herding cats, because the nation's 8,000 taxing jurisdictions have different approaches to the problem.

"There are 42 states at the table now working on the (tax) provisions," said Charles Collins, vice president of government affairs at sales tax software provider Taxware Inc. on Wednesday. "They need to show Congress that there's been some progress."

The SSTP effort has been underway for a few years and a meeting last month in Atlanta helped some states to clarify the situation. Many politicians have avoided the issue because it is unpopular with voters.

Collins, a former co-chair of the SSTP, expects 12 or 13 states to become full members of the program, with 6 or 7 probably to join soon after June 30th. States in the voluntary program will cooperate with other states in levying sales taxes on goods shipped over state borders.

Most states have some involvement with the SSTP effort, although some states--Alaska, Delaware, Montana, New Hampshire, and Oregon--aren't involved because they don't have sales taxes. Colorado and Idaho, which do levy sales taxes, aren't participating in the SSTP effort, according to Collins.

As its "project mission," the STTP states that it is working to "develop measures to design, test, and implement a sales and use tax system that radically simplifies sales and use taxes."

The SSTP is promoting two requests for proposals designed to move the tax effort forward. A registration system, proposed in January, calls for online retailers to register to signal their readiness to collect sales taxes. The other RFP--a sales tax tracking system--would certify software companies to carry out various sales and use tax functions.

Collins said he expects at least four or five companies--including Taxware--to be certified. SSTP members are hoping Congress will take up the issue next year.