BEFORE THE SENATE WAYS AND MEANS
AND ECONOMIC DEVELOPMENT COMMITTEE
Interested Party Testimony on SB 217
Wednesday – April 21, 2004

Mr. Chairman and Members of the Committee,

My name is Daniel Navin and I am the managing director of legislative affairs for the Ohio Chamber of Commerce. I am here today to outline the perspective of the Chamber on the important issue of the implementation of the Streamlined Sales Tax Project (SSTP) and, more specifically, the proposed destination-sourcing rule that represents a quantum change in sales tax compliance for many Ohio retail businesses.

First, the Chamber supports the collaborative national effort of states, local governments, bricks & mortar retailers and remote sellers to simplify the process of paying, collecting and remitting sales taxes. As with any simplification process, invariably there are major transition issues that can be difficult for the affected states to adjust to. Such is the case in Ohio and several other states regarding destination-sourcing, which most of the states that levy a sales/use tax already have.

Second, our membership includes a significant number of small retailers who are losing a competitive advantage to e-retailers that do not charge sales tax. In addition, a number of those same small businesses and other small- and medium-size retailers that deliver their products to customers outside their home-base county would incur up-front computer software consulting expenses, possibly additional computer hardware expenditures and more training costs.

Third, because of the diversity of our membership, we are looking to strike a balance between the desire of some members who do business in multiple states to have a nationwide streamlined sales tax system and other mostly smaller businesses who can’t routinely incur unexpected computer software consulting, training and hardware expenses that don’t make them more profitable or expand their presence in the market. SB 217 tries to strike that balance and would soften the blow of the change in the sourcing rule to both smaller companies and affected counties.

The accounting firm of PriceWaterhouseCoopers is currently conducting a study of the cost of collecting sales taxes. Unfortunately, the study’s findings probably won’t be ready or available for six to eight months. That obviously doesn’t help further the process of calculating or credibly estimating the actual up-front costs of smaller vendors and other retailers that would have to comply with the new destination-sourcing rule. In the absence of that kind of data, we believe the approach of SB 217, providing some temporary compensation to vendors to assist them in complying with the new sourcing rule and also delaying Ohio’s participation in the SSTP governing board until certain conditions have been met regarding certified service providers, is reasonable under the circumstances.

Mr. Chairman, that completes my testimony and I will be happy to answer any questions.