The Tribune reports that the Civic Federation will release a report questioning an upcoming (but news-to-me) proposal by several Midwestern states to streamline sales taxes in exchange for collecting taxes on out of state (read: catalog and Internet) purchases. The end of the article points out that the micro taxes that add up to 9.75% for my takeout lunch — but 6% on an identical meal sold just 15 miles away, across the Indiana line — could fall victim to this streamlining. After all, we can’t expect every single online retailer to remember all of the thousands of sales tax rates across the US, right?
Although this might seem to be a nightmarish predicament that will result in huge revenue losses for local governments reliant on local-option sales taxes, one interesting wrinkle arises: what if this “sales tax streamlining” could result in sales tax revenue sharing? Doing so would iron out local inefficiencies, like retail sales “leaking” to lower tax jurisdictions or fiscal zoning that lures big box stores solely for the resulting sales tax revenue.