An analysis of the feasibility of implementing a single rate sales tax

The National Tax Association's project on the taxation of telecommunication s and electronic commerce recommended that each state employing a sales and use tax consider adopting a single statewide rate rather than continue wit h the number of rates currently in use, This recommendation tons made in re sponse to the criticism that current state sales and use tax schemes are to o complex to expert multi-state vendors to collect anti remit the sales tax in thousands of state and local jurisdictions. This article reviews the hi story of single rate suggestions and the problems for state and local gover nments that are expected to develop under such a proposal. The feasibility of adopting such a policy in five states, California, Georgia, New York, Te nnessee, and Utah, is analyzed. The results of the examination reveal that the proposal is administratively feasible and simplification could be achie ved. In some states the adoption of a single mie would result in modest lax revenue shifts, but in of hers the revenue readjustments would be signific ant. All states would face sizable political obstacles to a single rate pro posal. We conclude that states should consider using a single rate for use tax collections and continue the use of multiple rates for instate sales ta x collections. Regardless, states must actively pursue polices to simplify their current tax processes at every opportunity.