Getting ready to tax the Internet...again?

TRACKSIDE © by John D’Aloia Jr. August 19, 2003

The word circulating around Topeka is that there is no support amongst Kansas legislators for a special session to reform or repeal House Bill 2005, the imposition of destination sales tax collection on an unsuspecting business community. In spite of the pleas for relief from their constituents, a legislative majority remains enamored with the provisions of the bill. They can whistle past the graveyard all they want - the issue is not going away. For those struggling in the trenches to comply with this monstrous government edict, be assured that there are those who are continuing to gnaw at the bone and are gathering strength to force remedial action in the 2004 session.

One example of the effort is the Sensible Sales Tax Coalition. Through those groups who have already signed on to the Coalition’s resolution of purpose, the Coalition is claiming to represent thousands of Kansas companies. The resolution charges that: "... the policies enacted by the 2003 session of the Kansas Legislature regarding the Streamlined Sales Tax Project were ill founded. ... Instead of simplifying sales and use taxes, this weighty legislation is far more complicated and burdensome than the previous law. ... it immediately imposes a huge permanent burden on businesses. ... The implementation time-line in the legislation was recklessly ... short. ... we also believe the state has no legal authority to refrain from enforcing this duly enacted legislation, however impractical, unjust, or administratively difficult its enforcement may be." The Resolution closes recommending that: "Kansas should pass laws that halt all enforcement of the recently passed SSTP rules changes and prohibit the state from requiring private businesses to implement any relevant changes to their administrative practices until at least six months after such Congressional approval is enacted."

The Kansas Chapter of the National Federation of Independent Business has signed the Resolution. While the NFIB Kansas membership is split on whether SSTP is good or bad, the membership is not split on other aspects of the project. The membership is strongly opposed to forcing retailers to track an unprecedented number of taxing jurisdictions. (The suggestion was made that the state establish a single sales tax rate for any off-site sale, with the Kansas Department of Revenue deciding how to divvy up the tax dollars.) The membership is strongly in favor of delaying destination sourcing until six months after Congress enacts legislation authorizing what the SSTP is trying to do. (This does appear to be a common request, does it not, and a reasonable one.)

The Streamlined Sales Tax Project is under fire in other states. Bill Owens, the Governor of Colorado, recently authored an article titled "Nine Problems with Taxing the Internet: Questions Governors and Legislators Must Consider." After reading it, it is obvious that Kansas politicians did not give HB2005 much thought, blinded probably by the gleam from the Leprechaun’s pot of gold. A first page sidebar lists Owens’ nine questions and his succinct response, expanded and discussed in the six pages that follow: (1) Is SSTP revenue neutral? NO, (2) Will the SSTP simplify tax compliance? NO, (3) Does the SSTP pose threats to consumer privacy? YES, (4) Will the SSTP require states to forfeit sovereignty over tax policy? YES, (5) Is the SSTP consistent with the constitutional scheme of federalism? NO, (6) Will the SSTP reduce tax policy competition between states? YES, (7) Will the SSTP impede the success of the technology revolution? YES, (8) Will the SSTP hurt certain citizens more than others? YES, and (9) Will the SSTP create equity between brick-and-mortar and on-line retailers? NO. The Governor’s response to the fourth question caught my eye. He wrote "Oversight and implementation of a significant portion of your state’s tax policy would be ceded to and dictated by a board of unelected and unaccountable out-of-state bureaucrats. SSTP essentially creates the UN of state tax policy." That indictment, coupled with the entire project’s dubious constitutionality, is enough, in my mind, to kill the entire effort. But, constitutional issues aside, Owen’s economic arguments are of such weight as to justify rejecting the entire mess.

Are our state legislators up to the task of protecting Kansas citizens from Clerks around the country? Not as long as they believe that SSTP will generate more dollars for them to distribute and give them positions of power. A Topeka street story is that HB2005 was jammed through the legislature in the waning hours of the session so that one senator, to remain nameless, could keep his seat on the SSTP’s national committee. Such is politics.

See you Trackside


Persons, companies, and organizations wanting to join the Sensible Sales Tax Coalition should contact Bob Corkins, Coalition Coordinator, at 785-233-8765. Governor Owens’ article can be found at


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