In 1992 the U.S. Supreme Court ruled states could not require sellers that do not have a physical presence or “nexus” within the same state as the consumer to collect state taxes. The court also ruled that buyers owe the tax, but said the current tax system, with its thousands of jurisdictions and differing definitions of taxable items, is too burdensome to force online or mail order retailers to charge and collect sales taxes.
The Streamlined Sales Tax Project (SSTP) was organized in 2000 by state governments, with involvement from local governments and the private sector, to address the Supreme Court ruling by simplifying and modernizing sales and use tax collection and administration. They hope to simplify the tax system so it overcomes the Supreme Court’s ruling that the current system is too burdensome to collect the tax, even though buyers owe it.
In November 2002, 30 states and the District of Columbia approved the provisions of the SSTP’s interstate agreement. Twenty-one states have moved forward and enacted all or part of the conforming legislation.
In essence, the project is designed to enable retailers to charge whatever sales tax is in place where the buyer is located. There are more than 8,000 sales tax jurisdictions across the country.
Two years ago legislation was introduced in Congress that would have sanctioned the SSTP efforts and required out-of-state retailers to collect sales taxes. The bill did not move, and no such legislation has been introduced in the current session of Congress.
— Steve Stanek