URGING FLEXIBILITY IN STATE AND LOCAL SALES TAX RATES IN STATE EFFORTS TO SIMPLIFY SALES AND USE TAX SYSTEMS FOR REMOTE SALES

WHEREAS, thirty three states are currently participating in an effort called the Streamlined Sales Tax Project to simplify state and local sales and use taxes to make them uniform and easy for all sellers, particularly out-of-state merchants, to collect and remit to state and local governments; and

WHEREAS, currently many out-of-state sellers do not collect state and local sales and use taxes because the Supreme Court has ruled in 1967 and again in 1992 that it would be overly burdensome and too costly to require sellers to know the different tax rates, and keep up with the changes in thousands of different state and local governments in which they do not have any physical presence; and

WHEREAS, according to a study released by the University of Tennessee in 2001, state and local governments will lose an estimated $45.2 billion in annual revenues in 2006 and $54.8 billion by 2011 due uncollected taxes on remote sales; and

WHEREAS, the Supreme Court's Bellas Hess and Quill decisions pre-date the Internet and much of the high tech in use today. In today's world technology has made it possible for companies like Amazon.Com to track a variety of details about its 28 million products and 25 million customers ; and

WHEREAS, this same technology can be used to facilitate the collection of sales and use taxes and the Streamlined Sales Tax Project is in the process of developing software (which will show tax rates based on a customer's zip code) and making it available to out-of-state merchants in order to make collection on remote sales simple and easy; and

WHEREAS, states involved in the Streamlined Sales Tax Project are planning to complete action on a uniform, simplification plan by the end of the summer of 2002. And after the plan is approved, each participating state will enter a multi-state agreement to implement the plan, and be expected to make the necessary changes in their sales and use tax laws to bring them in conformity with the terms of the multi-state agreement; and

WHEREAS, at a meeting in April 2002 in Dearborn, the Streamlined Sales Tax Implementing States voted to modify the terms of the proposed agreement to allow local governments to continue the practice of taxing some items that their states do not tax. An earlier draft of the proposal threatened to eliminate this practice by limiting states and localities to a uniform tax base (taxable items), and by limiting each state to a single sales tax rate and each local government to a single sales tax rate; and

WHEREAS, many states currently exempt some items (such as food) from their sales tax but allow their local governments to tax them. The limitation in the earlier draft would have forced states to choose between two very unpopular choices-either increase taxes by applying the state's sales tax to the exempt items or eliminate the local option tax, which provides a huge revenue source for some local governments; and

WHEREAS, under the compromise adopted last April, state and local governments will be limited to a uniform tax base, and each local government would be limited to a single sales tax rate while the state would be limited to a single general sales tax rate with the option of having one additional rate that could be zero. This will allow local governments to continue to tax some items that their states apply a zero tax rate; and

WHEREAS, representatives from some states who opposed the compromise plan are expected to offer amendments at the upcoming meetings of the Streamlined Sales Tax Implementing States to change the agreement back to the earlier draft language that poses a problem for local governments,

NOW, THEREFORE, BE IT RESOLVED that The United States Conference of Mayors urges the Streamlined Sales Tax Implementing States to retain the language recommended by Illinois State Senator Steven Rauschenberger and adopted on April 13, which will allow local governments to continue to tax some items that the states apply a zero tax rate to.