Virginia joined a multi-state effort to develop a simplified sales tax system for online sales when Gov. Mark Warner signed legislation into law this month.
Virginia is the 28th state to participate in the Streamlined Sales Tax Project. Under the system, states would participate voluntarily.
States would be required to adopt authorizing legislation and enact simplification measures, including adopting uniform product codes and limiting the frequency with which local governments can change their tax rates.
Small and midsize multi-state retailers would use state-certified software to calculate, collect and remit use taxes for transactions in states in which they lack a physical presence.
The Direct Marketing Association has said the project fails to include one tax rate per state, business activity tax nexus standards and simple definitions for items. For example, a pair of tennis shoes might be considered sportswear, and thereby taxable, in one state while it may be considered clothing and nontaxable in another state. To compound the problem, each state and thousands of substate jurisdictions have varying tax rates.
The project's goal is to draft a final interstate agreement by the end of the summer. States could begin drafting conforming legislation in fall 2002 and have it considered in their next legislative session.