Several lobbies have opposed a congressional bill that would make interstate sales tax collection mandatory whether or not the seller has a physical presence in the state. Catalogers and e-commerce firms are aware of this hot-button issue, but not retailers selling over mobile.

New mobile phones on the market offer some of the same HTML browsing experiences as seen on computers. Even though the market for mobile commerce is nascent, consumers can still make mobile purchases via commerce-enabled WAP or regular e-commerce sites.

"The mobile phone is just the latest conduit or new form of technology that crosses state lines of authority," said Steven K. Berry, executive vice president of government affairs and corporate responsibility at the Direct Marketing Association, Washington.

But let's step back a bit.

The DMA last week testified before the House Judiciary Subcommittee on Commercial & Administrative Law to oppose the Sales Tax Fairness and Simplification Act. The bill, also known as H.R. 3396, was introduced by Rep. William Delahunt (D-MA).

If the bill becomes law, states can collect tax from the seller regardless of whether that company has a tax nexus in the taxing state.

Taxing authority
States can currently force an out-of-state seller to collect its sales tax only if the out-of-state seller has a physical presence in the state -- for example, a store, employees or inventory.

"Expanded and overlapping state tax jurisdictions would seriously jeopardize the continued growth of electronic commerce in the United States, and it would impede the access of small and medium-sized companies to a nationwide market," said DMA tax counsel George Isaacson in his House testimony.

"If enacted, H.R. 3396 would result in an unprecedented expansion of state taxing authority," he warned.

Mr. Isaacson told the members of the House panel that the Streamlined Sales Tax Agreement referenced in the legislation was "a document drafted by tax administrators and -- as might be expected -- it resulted in little in the way of tax simplification."

According to the DMA, the Streamlined Sales Tax Agreement fails to reduce the 7,600 varying tax rates nationwide. It doesn't reduce the burden of tax collection, remittance of tax and audits placed on interstate marketers. And it also fails to guarantee fair vendor compensation for tax collection.

Not surprisingly, Mr. Isaacson's opposition to H.R. 3396 was emphatic.

"Congress should not endorse this misnamed exercise in state tax reform," he said in his testimony.

Wrap trap
The DMA is taking shield behind the 1967 U.S. Supreme Court Bellas Hess decision. The court said that an out-of-state company cannot be required to collect sales tax on sales into a state where that company has no presence.

A 1992 U.S. Supreme Court Quill decision also reinforced the concept that, absent a physical presence in a state, an out-of-state seller cannot be compelled to collect sales tax.

In essence, those exemptions apply to traditional mail order or catalog sales, sales via landline phone and the Internet.

With the explosion in mobile phone usage nationwide -- and the expected increase in mobile commerce -- states will soon want to collect tax from the mobile retailer regardless of whether that company has a tax nexus in the taxing state.

"The mobile phone is just another version, albeit a modern one, of a channel to reach customers," Mr. Berry said. "But the issue has not changed over the last 40 years."

The DMA also cites the U.S. Constitution and its Interstate Commerce Clause in its defence of an open-market economy.

"The issue of uncollected sales tax is a self-correcting problem as more and more companies are becoming 'bricks-and-clicks,' with stores in states as well as the Internet, catalog and mobile channels to reach you," Mr. Berry said.

"The reason this is important is because the trend is to reach the customer at all touch-points," he said. "The advantage now is to have a wrap-around strategy."