Utah GrassRoots 2015 Legislative Report Addendum—SJR6

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SJR6, “Joint Resolution Urging Congress to Support Equity and Sales Tax Fairness,” sponsored by Senator Harper and Representative Eliason, urges Congress to pass, without delay, federal legislation for the “fair and constitutional collection of state and local sales and use taxes”; and requiring that similarly situated purchasers pay the same sales and use tax rates:

• regardless of which type of retailer (brick-and-mortar or internet) they make their purchases from; and
• regardless of where that retailer is located (in-state or out-of-state).

Further, SJR6 urges that Congress consider the following principles and ideas when drafting the legislation:

• utilizing state-provided or state-certified tax collection and remittance software that is simple to implement and maintain;
• immunity from civil liability for retailers utilizing state-provided or state-certified software in tax collection and remittance;
• tax audit accountability to a single state tax audit authority;
• elimination of interstate tax complexity by streamlining taxable good categories;
• adoption of a meaningful small business exception so that small businesses that sell remotely are not adversely affected by the legislation; and
• fair compensation to the tax collecting retailer.

State and local governments can already collect sales and use taxes on sales by retailers in their own jurisdictions . . . even when the sales are to residents outside of their own state. But the high-sales-tax states are confronted with this uncomfortable truth: consumers are often attracted to lower prices and, therefore, may be attracted to make purchases from vendors in low-sales-tax states. Should Congress go out of its way to help states get around this uncomfortable truth?

We imagine it is this uncomfortable truth that motivates many high-sales-tax states to lobby for a federal mandate that the governing tax-rate be the tax-rate where the buyer lives, rather than the tax-rate where the seller is located.

In the former case (tax-rate based on where the buyer lives), there might be a built-in incentive for states and localities to increase sales tax rates. After all, if you live in Location X, Utah, you have to pay the same sales tax rate wherever you shop (local brick-and-mortar store or out-of-state internet-based store). Of course, in this case there are thousands of different sales tax rates for the seller (who is outside the taxing jurisdiction) to deal with, thus the need for federally approved, or even federally administered, enforcement/tax collection.

In the latter case (tax-rate based on where the seller is located), there is a natural disincentive for raising sales tax rates too high (it might drive away internet-based sales businesses). In this case there is no need for federal involvement (nor for SJR6).

There is no need for federal intervention to squeeze more taxes out of purchasers. Furthermore, such federal intervention would make many (if not all) states even more dependent on the federal government, thus further eroding state sovereignty while increasing federal government power. GrassRoots favors a “no” vote on SJR6.

SJR6 passed the Senate 25-0 on February 20th, and passed the House 66-4 on March 2nd.