Abstract

The Streamlined Sales Tax Project is a national effort to develop a standardized sales tax system. In November 2002, the Streamlined Sales and Use Tax Agreement (the Agreement) was approved by 30 states and the District of Columbia. As of November 2004, 21 states enacted legislation to reform their sales tax system in accordance with the Agreement. California became an active voting participant in this effort in January 2004. The next step is for California to decide whether to conform its sales and use tax laws to those of the Agreement. Preliminary analysis by the California State Board of Equalization indicates that conforming to the Agreement would require a major overhaul of the state's sales and use tax system. Taxes collected on sales throughout the state would be affected, not just taxes on sales made over the Internet. This report analyzes the impacts of joining the Agreement on the California sales and use tax system. The report also analyzes state revenue losses due to the inability to enforce use tax collection on remote sales (mail catalog and electronic sales). Advocates for the streamlining process argue that use tax compliance would improve if all states were to comply with the SSUTA.

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