Statement of Policy
Internet Sales Tax
The US Supreme Court holding in Bellas Hess v. Illinois and Quill Corp. v. North Dakota U.S.
ruled that due to the highly complicated and disparate interstate tax system, a state may
not require a seller that does not have a physical presence within that state to collect tax on
sales into that state. The court believed that such a requirement would be too complicated
to impose on a business that did not have a physical presence in the state. The Court did
rule that Congress has the authority to allow states to require remote sellers to collect tax.
The Internet taxation debate for CCIMs revolves around the issue of how collection of such a
tax affects state and local sales tax revenues. If a merchant has a store or office in your
state (i.e., a “nexus”), your state government can require that merchant to collect sales tax
on your Internet purchases. Even if the merchant does not have a nexus in your state, the
purchaser of an Internet good has the legal obligation to pay a “use” tax when the good
arrives in your state. These transactions are difficult to monitor and consumers are not
paying the “use” tax.
The main revenue sources for state and local governments include income taxes, real
estate/property taxes and sales taxes, of which sales tax accounts for 30 percent. In 2005,
internet sales topped $86.3 billion, an increase of 24.6 percent over the previous year. Not
taxing the increasing Internet sales as they replace “brick and mortar” sales would result in
a significant decline in sales tax revenues for state and local government. In order to
compensate for the decline in revenue, we predict that state and local governments will
have to increase other taxes, specifically, real estate, property and income taxes.
In addition, if Internet merchants and their goods continue to effectively receive an
exemption from sales taxes, they have an unfair competitive advantage over brick and
mortar merchants in our communities. This could cause even more consumers to divert
their shopping from local merchants to tax-free online merchants.
In the face of extreme budget shortfalls and deficits, cash strapped states are frantically
searching for additional revenue sources and ways to broaden their tax base, breathing new
life into the Internet Sales Tax debate. An increasing number of state legislatures have
introduced legislation targeting internet sales for tax collection. For example, a new
Colorado law requires online retailers to inform Colorado residents how much they owe in
sales tax for online purchases. The Colorado Department of Revenue may also require
online retailers that do more than $100,000 in annual sales to disclose a summary of
people’s web purchases within the state.
The leading obstacle to efforts to collect sales taxes on internet purchases is the same
complicated state tax systems that led to the Supreme Court decision. The Streamlined
Sales Tax (SST) Project was formed in 2000 to design, test and implement a sales and use
tax system that radically simplifies sales and use taxes. Project participants include state
revenue department administrators, state legislators, local governments, national retailers,
trade associations, and other representatives from the business community. In 2002, the
Project drafted provisions for the Streamlined Sales and Use Tax Agreement. Current
membership includes 20 Full Members and 3 Associate Members.
Position Statement
The CCIM Institute believes that economically equivalent transactions should bring similar
tax consequences, and supports a level playing field for local in-store retailers and remote
merchants (including Internet merchants).
The CCIM Institute believes that loss of revenue due to failure to collect sales tax on goods
sold over the Internet is likely to place pressure on state and local governments to find
replacement revenue in the form of increased, real estate and property taxes, income taxes,
transfer taxes and/or impact fees.
The CCIM Institute is also concerned that the erosion of state and local sales tax collections
will encourage state and local governments to seek to expand their sales and use tax bases.
In this regard, the CCIM Institute is firmly opposed to any expansion that would impose
taxes on the cost of services, such as fees and other costs associated with the purchase and
ownership of real estate.
The CCIM Institute supports efforts to simplify the collection and payment of state/local
sales/use taxes. State and local governments should be able to enforce existing sales and
use tax laws for both intra-state and inter-state purchases. In order to establish an
effective and simple means of collecting of these taxes, state and local governments first
must simplify their existing state and local sales and use tax systems.
The CCIM Institute believes the key issues associated with the Internet Tax debate affect
state and local government revenues. Accordingly, we believe state and local legislative
action is appropriate, and we encourage state legislative action that would provide
consistent sales tax consequences for economically equivalent transactions and simplify
state/local sales/use taxes. We do not support Federal legislation that – without consent
and participation of state governments – would preempt states' efforts to address their own
sales and use tax issues consistent with this statement of policy.
(6/00; updated 10/06, 04/10)