States struggling with online and catalog sales tax

Utah isn't the only state that put off implementation of a new sales tax collection system aimed at getting catalog and online sales tax skippers.

Ohio has put off implementation of its "streamline sales tax" system three times, a special National Conference of State Legislature's task force was told Monday.

About 5,000 of the nation's state lawmakers are in Utah this week for the NCSL's national convention. Various task forces and other committees met Monday. The main convention work starts today.

Utah State Tax Commissioner Bruce Johnson has worked with the NCSL task force and other groups for four years trying to find a way to make businesses that ship buyers' products to other states remit that state's sales tax.

More than $15 billion dollars is likely lost each year in state and local sales taxes because the buyer purchases something from an out-of-state catalog or online and doesn't pay sales tax, a new NCSL report shows. States could be losing $33 billion by 2008, online retailing is growing so fast, the report says.

Johnson told legislators Monday that while various difficulties are resulting in some states putting off implementation of new sales tax collection systems, as Utah did in a special legislative session just last month, it's still coming.

Utah could have forged ahead July 1 and forced the new system on local retailers who deliver some products to buyers' homes.

"We did a good job of educating" local businesses, Johnson said. But the Tax Commission, which collects sales taxes for the state and local entities, didn't do an adequate job "getting people on board." In other words, angry or worried business owners got Utah legislators to put off the switch.

Most businesses don't even have to worry about the new system, aimed at making it easier for businesses across the country to determine out-of-state tax rates and assess those taxes on buyers' bills.

If you don't deliver your products, you don't have to have the new system. But regulators also miscalculated how many small Utah businesses do, on occasion, deliver some goods. "It could be 20 percent" of retailers, Johnson said.

An Illinois legislator said his state's tax officials believe it is more like 25 percent of retailers in his state.

Even with the new system, there will be oddities, Johnson said.