State to Study Web Sales Tax

A bill that would make California part of a consortium of 36 states working on the issue breezed through a Senate committee Wednesday with bipartisan approval. And state tax regulators voted to begin limited participation with the consortium, effective immediately.

"California isn't able to collect billions of dollars that people currently owe," said Sen. Debra Bowen (D-Marina del Rey), author of SB 157, which would make California a full voting member of the Streamlined Sales Tax Project consortium.

Bowen said the current system "hurts the people who shop locally and are forced to pick up a larger share of the tab for those critical services that everyone in California relies on."

Some Republicans, however, expressed concern that collecting the taxes would hurt online and catalog sales. And they also said the consortium may be seeking solutions that would undermine some of California's laws.

U.S. Supreme Court decisions have made it impossible for states to require out-of-state companies to collect sales taxes without an act of Congress. Congress has so far failed to act out of the same concern expressed by the court: Forcing retailers to collect the taxes for thousands of state and local tax jurisdictions, each with its own set of complicated rules, would be too much of a burden.

The Streamlined Sales Tax Project is an attempt to simplify the taxing process, with every jurisdiction adopting the same rules so retailers would find it easier to collect the tax. While the tax rates could vary from place to place, details such as the way products are categorized for tax purposes would be made uniform.

States that belong to the consortium would enact legislation adopting the new tax codes, and businesses would be asked to participate voluntarily until Congress acts. Supporters of the project say that if Congress fails to act, the simplification of the tax codes would put the states on a firm footing to go back before the Supreme Court on the issue.

If the project succeeds and California ultimately changes its tax codes to conform with it, the state could begin collecting sales tax on out-of-state purchases made online and through the mail by early 2005.