Recent Sales and Use Tax Developments
Michigan Amends Sales Tax Law to Comply With Streamline
Sales Tax Project. Governor Granholm recently signed legislation to amend
Michigan Sales and Use tax laws, effective September 1, 2004, to comply with
the Streamline Sales Tax Project ("SSTP"). The SSTP is a multi-state pact
designed to make it easier for online and other retailers that do business
in multiple states to calculate, collect and remit use tax. States looking
to join the pact are required to adopt the SSTP provisions to "simplify"
their sales and use tax laws. Currently, approximately 40 other states have
adopted the SSTP provisions.
One purpose of the Agreement is to simplify and modernize
sales and use tax administration in the various states in order to
substantially reduce the burden of tax compliance. A second purpose of the
SSTP is to convince Congress (or the U.S. Supreme Court) to allow states
that have simplified their tax systems to require out-of-state sellers to
collect the tax on purchases in those states, even when the seller did not
have physical presence or nexus with that state. States have tried to force
remote sellers without a physical presence in the customer state to collect
sales and use taxes from customers of catalog, telephone and internet
sellers. The U.S. Supreme Court prevented the states from requiring
collection in the landmark case Quill Corp. v North Dakota. In
Quill, the Supreme Court held that because sales and use taxes are so
complicated, requiring remote sellers to collect in the various states and
local jurisdictions with sales and use taxes would create a burden on
interstate commerce. When the burden of tax collection is eased by adoption
of the SSTP, the states ’ hope is that the burden on interstate commerce
will be removed, and the U.S. Supreme Court or Congress will require sales
tax collection from remote sellers.
Collection by remote sellers will remain a voluntary
collection system for sellers without a physical presence or nexus in a
given state. Collection by remote sellers will become mandatory only if a
court of competent jurisdiction rules that the complexity concerns
underpinning the Quill Corporation case have been resolved, or if federal
legislation is enacted granting states collection authority over remote
sellers.
Federal legislation has been introduced in both chambers of
Congress, which would authorize a state which has adopted the SSTP to
require remote sellers to collect and remit sales and use taxes on purchases
in that state.
The SSTP revisions to Michigan sales and use tax laws are
too extensive to include in their entirety, but they include the following
amendments:
- State/Central Administration of State and Local Sales and Use Taxes
- Local jurisdictions limited to a single rate per jurisdiction
- Uniform Procedures for Exemptions
- Uniform Definition of Food and Related Items
- Uniform Administrative Definitions – "Sale", "Purchase Price", "Delivery Charge", etc.
- Uniform Definition for Tangible Personal Property, Software, Drugs, Medical Equipment, Leasing, etc.
- Amnesty for participating, voluntary sellers
Retailers located in Michigan should review the provisions of the SSTP to determine whether the changes affect their responsibility to remit sales and use tax on sales in the State of Michigan.