The implementing states of the Streamlined Sales and Use Tax Agreement voted to create an associate membership, keeping the agreement on track toward its Oct. 1, 2005, interstate effective date.

The new two-tiered membership will enable the states to garner the votes needed for approval. For the SSTA to take effect, at least 10 states comprising a minimum of 20 percent of the total U.S. population must pass legislation in compliance with the accord. Without the associate members' population inclusion, the population was well under the 20 percent needed.

"It is very important," said Harley Duncan, executive director of the Federation of Tax Administrators, of the proposal's passage. "It allows us to go forward and doesn't detract from the simplification that's required of states."

Associate member states will have the same rights and privileges as regular member states, only with restricted voting rights. Mostly likely, associate members will be states like Minnesota, Ohio and Utah, which have all delayed their SSTA effective date but have still passed some form of SSTA legislation. These states will now have until Dec. 31, 2007, to come into complete compliance with SSTA regulations and graduate from associate members to full members, or forfeit their connection to the SSTA entirely.

During the meeting last weekend, the group also passed a dozen other amendments, creating uniform definitions for the terms "bundled transactions" and "telecommunications services," and defining the difference between software that a user downloads electronically and software downloaded off a physical storage medium, like a CD-ROM.

Another meeting is set for June 30 to July 1 in Chicago, where the applications from states petitioning to be either members or associate members will be considered. Duncan added that states like New Jersey and Wisconsin, which both have SSTA bills now under consideration in their legislatures, could also apply for review and associate membership as long as some legislation passes by the July 1 review date.

The SSTA still isn't enforceable at the federal level, but some members of the Senate are hoping to change that with S.B. 1736. The bill, co-sponsored by Senators Mike Enzi, R-Wyo., and Byron Dorgan, D-N.D., and introduced to Congress in 2003, says that states could "require all sellers not qualifying for the small business exception provided by this act" enforce collection and remittance of sales and use taxes on remote sellers.

However, a 1992 Supreme Court ruling, Quill v. North Dakota, stated that the numerous taxing jurisdictions across the nation created an overwhelming burden on remote sellers to comply with each jurisdiction's sales and use tax. The court decided then to limit the collection and remittance of sales and use taxes to those sellers that have a physical presence in the taxing jurisdiction.

So even if the SSTA passes across the member and associate member states, the regulations will still be unenforceable until action is taken at the federal level.

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