Is Destination-Based Sales Tax the Way of the Future?

In 2008, Washington state joined the ranks of those states that are moving to the Destination-based sales tax model. This was pretty well advertised in Washington circles and many online storeowners in Washington state showed the requisite amount of concern over being able to handle this newly created issue.

While storeowners in the other 49 states seemed to breathe a collective sigh of relief at not having a physical presence in Washington state the fact is that Washington is not the only state that currently has rules that apply to destination-based sales tax collection.

Florida, Texas, California and New York all have varying degrees of rules that require storeowners that transact business with customers in these respective states to collect and report sales tax based on where the products that are sold are ultimately delivered.

Obviously, there are two schools of thought on these newly created sales tax burdens – 1) storeowners are playing a “come and get me” game hoping that states don’t actually have the time or money to track down sales that are made in their states and 2) the “I don’t care what the tax rules are I just want to be compliant” crowd. No matter which crowd you hang your hat in, one thing is for sure in a down economy, the money reservoirs that states used to be able to find from in-state vendors is drying up. Here in Florida, we’re dealing with huge budget deficits for our public education system and many of the state legislators are reluctant to raise any taxes locally, but at the same time seem perfectly fine with collecting taxes on outside-the-state vendors who ship items to Florida residents. I doubt this is a problem that is unique to Florida these days and am sure other states are reviewing their own possibilities in this arena.

Whether the states are successful in seeking sales tax collections from outside vendors will be the true test. Will the federal government insert itself into the mix, knowing that some of these states are facing huge deficits and even potential bankruptcies?

No one can say for sure, but as the axiom says, “may you live in interesting times”, well, I guess 2009 qualifies.