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Supporters of streamlining the nation’s sales tax codes say that if it is easier for out-of-state online and catalog businesses to collect, they will voluntarily send sale taxes to states where their products are shipped. Ten of the participating states came online this year and it’s too early to determine how well the system is working.
A series of U.S. Supreme Court cases have prevented states from requiring businesses without a presence in their state from collecting and remitting sale taxes. Online retailers and catalog operators have successfully argued that with 7,000 tax jurisdictions nationwide, collecting taxes is too complicated and costly. The courts agreed, saying it would be a barrier to interstate commerce.
If all or most states begin using the same tax codes, federal laws could be passed requiring vendors to collect taxes for the states.
While Lansing lawmakers are working to solve a $1 billion budget shortfall, collecting sales tax from online firms doesn’t appear to be a quick fix. The changes to the tax code also will mean more goods are exempted from sales tax. So while Michigan plans to collect an additional $26 million in sales tax, it will lose out on $18 million because of the changes. Next year’s total gain may only be $8 million, but treasury officials believe the tax code changes will mean more revenue in the future.