The agreement now goes to each state, which must enact legislation to bring their state and local sales tax laws into conformity with the agreement.
The agreement, which would become operable as soon as 10 states enact legislation, would establish uniform definitions for taxable goods and would require participating states and local governments to have only one statewide tax rate for each type of product effective 2006.
"States, in cooperation with the business community, continue to make great progress," said Kentucky Gov. Paul Patton, also the chairman of the National Governors Association. "This new agreement creates a more efficient system for both businesses and state and local governments."
"This is a 21st century system that will dramatically improve the morass that currently exists," Utah Gov. Michael Leavitt said.
It is estimated that a simplified system could save businesses millions of dollars in efficiencies by removing the burden of complying with existing laws, rules and regulations in thousands of jurisdictions. Implementation of the agreement would also create a level playing field between "remote" sellers, which are not obligated to collect and remit sales taxes and Main Street retailers, which must collect sales taxes.
Currently, America's sales and use tax system, with 7,500 state and local taxing jurisdictions across the nation, is antiquated, complex and cumbersome to businesses, especially given the new reliance on IT.
The Streamlined Sales Tax Project, if successful, would be the first overhaul of the nation's sales tax policy in 40 years -- and the first time states had acted together to significantly restructure the system.
A 1992 U.S. Supreme Court case ruled that states must first simplify their sales tax laws in order to require out-of-state retailers to collect and remit those levies. Congressional action or a decision by the high court would be needed to give states that authority.
In Nov. 2001, Congress extended for two years a moratorium on Internet access taxes. Those are the fees consumers pay to Internet Service Providers. The legislation does not apply to the collection of sales and use taxes.
