What’s The Streamlined Sales Tax Project – And Should We Jump In

By
Guest Contributor
-
9
3262
Tom Yamachika, Tax Foundation of Hawaii
article top
Tom Yamachika, Tax Foundation of Hawaii
Tom Yamachika, Tax Foundation of Hawaii

By Tom Yamachika– The topic of the Streamlined Sales Tax Project has come up every year for some time now, and from the discussions I see that the issues are not fully understood.

The problem is this. Hawaii consumers needing a certain product can buy it in a local store, where that sale is subject to our general excise tax, or they can buy it online, where many of the retailers aren’t subject to tax either here (because the retailer has no physical presence in Hawaii) or in the state they are selling from (because most states, including ours, have an exemption for export sales).

In theory, the law requires the Hawaii consumer to pay the tax directly to the state if that happens. But in reality most people don’t do that, especially when the purchases are small. As a result, government misses out on tax revenue, and the local businesses are hurt because they face competition from stores that legally aren’t paying our tax.

This problem could be solved if Congress steps in. It needs to be Congress doing this because only they have the power to regulate interstate commerce, which this is. But they aren’t about to force all businesses to collect all taxes imposed by every state, municipality, transportation district, port authority, mosquito abatement district, and any other taxing jurisdiction throughout the country. That would be way too complicated. (Obviously the folks who are writing our federal tax laws weren’t in the room, because they are no strangers to complicated ideas).

So a bunch of states got together and said, “Hey! What if we simplify our sales tax systems so there is just one rate per state, there are some uniform definitions for taxable and exempt items across the land, and there would be a multistate governing board that would watch over this uniformity effort? Wouldn’t that be simple enough of a system so that Congress can, with good conscience, impose it on the online sellers to collect tax for the states?”

So far 23 states have signed on to be full member states in the project, but none of the big economy states (CA, FL, IL, NY, and TX) are in. In Congress, the U.S. Senate passed the Marketplace Fairness Act (S. 743) on May 7, 2013, but it doesn’t appear to be moving in the U.S. House. From this we can see that there are no guarantees that either (a) all states will sign on to this system, or even states representing most of our country’s economy; or (b) Congress will be on board even if all states do sign on.

So what are the issues for Hawaii? Hawaii’s general excise tax isn’t a sales tax, and there are three rates (retail, wholesale, insurance commissions), not one. Thus, major surgery on our tax laws will be needed to come up with a law that meets Streamlined Sales requirements.

There is a bill in the legislature to do this surgery, and it’s pretty thick (H.B. 2135, House Draft 1, is 159 pages long). In 2007, the Hawaii Tax Review Commission (TRC) looked into the topic extensively.

The Department of Taxation told the TRC that the start-up costs for Hawaii to re-tool its systems, forms, instructions, and so forth to comply with the bill would be about $15 million, with the ongoing annual cost to administer it about $4 million. A noted expert on the topic told our TRC that the additional revenue to the state would be about $10 million a year.

The TRC’s recommendation at that time was this: “Until the Project shows greater promise of producing results, it is premature for Hawaii to incur the expense to join it.” So what do you think? Plunge in? Or sit on the sidelines for now?

Tom Yamachika is the Interim President of the Tax Foundation of Hawaii. Mr. Yamachika’s commentary is printed each week in the Maui News, West Hawaii Today, Garden Isle News, and the HawaiiReporter.com.

Comments

comments

9 COMMENTS

  1. I have bookmarked your website because this site contains valuable information in it. I am really happy with articles quality and presentation. Thanks a lot for keeping great stuff. I am very much thankful for this site.

    grand prix f1
    grand prix 2015

  4. The RBS Six Nations is here and the game was already started.Rugby Six Nations 2015 is an annual competition among 6 European

    nations including England, Wales, Scotland, France, Italy and Ireland. The TV rights are already announced for rugby six nations 2015

    live streaming. According to released Six Nations Rugby 2015 TV Broadcasting.

    six nations 2015
    rugby six nations 2015 live streaming
    6 nations 2015 live streaming
    Rugby six nations 2015 online live stream
    watch rugby six nations 2015 live streaming

  6. game of thrones season 5 episode 7
    Game of Thrones Season 5 Episode 7 online
    State of Origin 2015 Live
    Tomorrowland Belguim 2015 Live
    Game of Thrones Season 5 Episode 7 online
    Game of Thrones Season 5 Episode 7 online

    Hope Stannis whoops some ass.I dont know. Its unreal how much I love this show…I was a big WD and Vikings fan..there still great shows and still watch of course but I started watching GOT and had all the seasons to watch and I was in GOT heaven for like a week in a half.Thats all I was watching and immediatly loved the show. The whole show , top to bottom is amazing. Its like watching a short movie each episode.

  9. Hope Stannis whoops some ass.I dont know. Its unreal how much I love this show…I was a big WD and Vikings fan..there still great shows and still watch of course but I started watching GOT and had all the seasons to watch and I was in GOT heaven for like a week in a half.Thats all I was watching and immediatly loved the show. The whole show , top to bottom is amazing. Its like watching a short movie each episode.
    survivor series 2015 live
    survivor series 2015
    survivor series 2015 results

Comments are closed.