State Tax Snapshot: Lack of Uniformity, Whistleblower Lawsuits Among Biggest Issues in Sales and Use Tax Arena

Bloomberg BNA's Assistant Managing Editor for State Tax, Steven Roll, recently participated in a virtual roundtable conducted by Accounting Today with other state tax experts, which addressed recent trends in sales and use tax issues. The questions and Roll’s responses are below:

What would you say are the biggest issues in the sales and use tax arena?

Roll: One big issue is lack of uniformity among states. A certain level of uniformity has been achieved among the 24 states that enacted legislation that conforms to Streamlined Sales and Use Tax Agreement provisions. But even here, important differences remain. For example, the SSUTA member states have yet to adopt a uniform policy addressing the tax treatment of remote access to software and cloud computing models. The states that have not enacted SSUTA provisions include California and New York.

What would you say are the biggest issues in the sales and use tax arena?

Roll: Perhaps the biggest "hidden danger" are enforcement mechanisms that go beyond state tax revenue agencies. If a retailer collects too much tax, they may anger customers and become a defendant in a class-action lawsuit. If they don't collect enough tax, they may be targeted for a qui tam or whistleblower lawsuit in states such as Illinois and New York.

Where do you see things going in the next six to 12 months?

Roll: States will continue to be aggressive on the Internet tax issue and continue to resort to their own enforcement tactics. At the state level, there seems to be an erosion taking place in the argument that the imposition of sales tax on Internet purchases amounts to a "new tax." Traditionally, "red" states such as Georgia and Utah have enacted so-called click-through legislation requiring online retailers with in-state affiliates to collect tax.

One trigger that might spur congressional action on the online sales tax issue is the looming expiration of the Internet Tax Freedom Act in 2014. While the ITFA is limited to the issue of taxing Internet access, it might become a vehicle for the tax treatment of other forms of online commerce.





The full text of Accounting Today’s virtual roundtable report is here.


By Steven Roll

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