Bids sought for Net sales tax systems

Posted by joy

From The Washington Post

State governments working on a national Internet sales tax system are moving ahead with plans to create the data infrastructure that they and retailers will need to manage the collection of taxes on most e-commerce transactions.

Working together under the auspices of the Streamlined Sales Tax Project, 40 states and the District of Columbia have issued two requests for bids from technology companies to design the software and Web-based networks to track millions of online purchases and process the appropriate sales tax payments.

A request issued by the states last Friday seeks bids to build a registration system where all Internet retailers — ranging from giants like to smaller companies — would go to declare their intent to collect and remit taxes on online sales made to customers in the project’s participating states.

The second request, issued last November, is aimed at making it easier for online retailers to collect sales taxes. The states plan to award contracts to multiple vendors who would provide sales tax collection systems to online retailers. As currently envisioned by the states, Web merchants would pay nothing for the services. Instead, the vendors would take a small cut from the revenues.

To date, 19 states — including Florida, Michigan and Texas — have modified their sales tax codes to make it easier for retailers to collect taxes on Internet sales. By October 2005, the states hope to have a voluntary collection system working in at least 15 states representing roughly one-fourth of the U.S. population. With that in place, they hope, Congress would be more likely to endorse a mandatory, national Internet sales tax system.

The Streamlined Sales Tax Project home page is Here is a list of participating states.

From someone whose day job is all about e-commerce, all I have to say is “Ugh.” You have to love the bit in the article about how this consortium is hoping to get a mandatory Internet sales tax imposed by Congress, once proof of concept for this sales tax system is implemented.

I’m guessing that the “system” that is being designed will be similar to how USPS/UPS/FedEx shipping tables are implemented for popular e-commerce shopping cart systems. In other words, the state and local sales tax tables will be updated every year and if you run your own shopping cart system, you’ll have to update the module provided by whatever vendor this sales tax group approves.

However, what I think is most interesting about this sales tax push is the fact that this consortium is pushing to collect sales tax based on the customer’s residency, not where the retailer (or the retailer’s servers) is located. Basically, this group is trying to enforce the idea that the transaction occurs where the customer is physically located. This is interesting as other parts of Internet law has been based upon where the servers are (i.e. AOL winning judgements against spammers because of Virginia laws being broken or the French decision against Yahoo).

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