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Article: Understanding the nuttiness of state tax policy: when states have both too much sovereignty and not enough.
- Article from:
- National Tax Journal
- Article date:
- September 1, 2005
- Author:
CopyrightCOPYRIGHT 2005 National Tax Association. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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INTRODUCTION
Several years ago I published a paper on the nuttiness of state and local taxes (McLure, 2002). These are among the many nutty characteristics of state sales and use taxes:
* Many services are exempt;
* Internet access is exempt; (1)
* Many business purchases are taxed;
* The sales tax system is incredibly complex, in large part because of interstate differences in tax bases, product definitions, and administrative practices, but also because of the existence of local taxes; and
* A state cannot require a vendor to collect its use tax unless the vendor has a physical presence in the state.