10.1 Preamble

The National Governors Association supports state efforts to pursue, through negotiations, the courts, and federal legislation, provisions that would require remote, out-of-state vendors to collect sales and use taxes from their customers. Such action is necessary to restore fairness between local retail store purchases and remote sellers and to provide a means for the states to collect taxes that are owed under existing law. The rapid growth of the Internet and electronic commerce underscores the importance of maintaining equitable treatment among all sellers.

In Quill Corp. v. North Dakota, 504 U.S. 298 (1992), the U.S. Supreme Court stated that, to secure a level playing field in the collection of sales and use taxes, states needed to eliminate undue administrative burdens on interstate commerce by simplifying the collection process for these taxes. The Court also clarified that Congress has the power to grant equitable collection authority to the states for sales and use taxes on remote sales. Governors support the development of a 21st century sales tax system that simplifies compliance requirements and streamlines sales taxes to ensure that states are prepared for the global electronic marketplace.

10.2 Streamlined Sales and Use Tax Agreement

Several states are working to eliminate undue administrative burdens on interstate commerce associated with sales and use taxes by participating in the Streamlined Sales and Use Tax Agreement (SSUTA). The SSUTA is designed as an agreement between participating states to simplify their sales and use tax systems to provide greater uniformity and certainty for businesses and consumers. Simplification would be accomplished through several key features, including uniform definitions within tax laws, rate simplification, state level tax administration of all state and local sales and use taxes, uniform sourcing rules, simplified exemption administration, uniform audit procedures, and state funding of the system.

SSUTA was triggered on October 1, 2005, when 13 states representing more than 20 percent of the population were certified as having met the requirements of the agreement. Since the agreement was triggered, more than 1,000 businesses have taken advantage of the simplifications offered by the agreement by volunteering to comply and collect sales taxes from their remote sales.

To support the extraordinary work of states and the business community to simplify sales and use taxes nationwide, governors encourage all participating states to fully implement their conforming legislation and seek certification as soon as possible.

10.3 Federal Streamlined Legislation

With the SSUTA’s participation threshold reached, Governors call on the federal government to enact legislation to require remote vendors to collect sales and use taxes on sales of taxable products destined for each state adhering to the agreement. The Quill decision granted Congress the authority under the Commerce Clause to recognize the efforts of states and the business community to simplify state sales and use tax systems. Congress should partner with the states by enacting federal legislation that is consistent with the SSUTA.

Specifically, federal legislation should include:

• a specific grant of authority to states that are a member of SSUTA to require remote vendors to collect sales and use taxes on sales of taxable products and services into their jurisdiction;
  
• a de minimis or small business exception that exempts small sellers from the collection requirements—such exception should be clear and limited so as not to jeopardize the collection authority of a state or undermine compliance with the agreement;
• compensation for the cost of collection on remote sales; and
• limited federal court review of the governing board’s actions by the Federal Court of Claims.

Governors oppose combining federal legislation granting member states the authority to collect from remote vendors with legislation that would otherwise divert, hinder, or undermine state revenues or taxing authority.

Time limited (effective Winter Meeting 2009–Winter Meeting 2011).
Adopted Winter Meeting 1999; reaffirmed Winter Meeting 2001; revised Annual Meeting 2002; reaffirmed Winter Meeting 2003; revised Winter Meeting 2005, Winter Meeting 2007, and Winter Meeting 2009 (formerly Policy EC-12).