Tax-free purchases from online retailers soon may be a thing of the past, and Tennessee is one of 22 states trying to make it happen.

Several changes to the state’s sales tax law went into effect this year, and more are scheduled for next year, in an effort to recast Tennessee’s law so it is similar to those in other states. The more alike the laws are, the easier it is for multistate retailers to collect taxes, said Scott Peterson, executive director of the Streamlined Sales Tax Governing Board Inc., based in Nashville.

“The sales tax system we have in the country is becoming unnecessarily difficult to administer,” he said.

Under the law changes, the average Tennessee consumer probably won’t see a huge difference in how much tax he or she pays, he said. But the changes in the law are a first step toward encouraging Congress to pass a law requiring all multistate retailers — whether they’re online, catalog or telephone — to collect sales taxes, he said. If all or most states have the same tax-collection setup, Congress may be more amenable to passing such a law, he said.

Mr. Peterson said he doesn’t expect Congress to pass a law requiring online tax collections this year.

Such a law may be a long time coming. This year, New York was the first state to pass a law requiring online sales-tax collections, but it’s already been challenged in the New York Supreme Court by online retail giant Amazon.com.

Part of the new Tennessee law simply deals with how merchandise is defined within state laws. For example, different states have different definitions of what a food item is or what medical items are, said Sherry Harrell, revenue policy analyst for the Tennessee Department of Revenue. Coupling that with a standardization of tax forms across the states can streamline the process, Mr. Peterson said, by having each item defined the same way and listed on the tax form in the same place.

At this point, 19 states are in full compliance with the recommendations of the Streamlined Sales Tax Governing Board, including Southern states such as Arkansas, North Carolina and Kentucky. Tennessee, along with Utah and Ohio, is in the process of implementing the board’s law changes.

Multistate retailers now don’t have to collect sales tax under a 1992 U.S. Supreme Court decision — known as the Quill decision — which says retailers are not required to collect taxes from buyers in states where the seller does not have a physical presence, such as a retail store or distribution warehouse.

Use taxes

In answer to that ruling, 45 states impose use taxes — essentially sales taxes levied on items shipped from out of state — but these aren’t always collected, either.

That doesn’t mean buyers don’t owe taxes on online or out-of-state purchases, the taxes just are not collected, Mr. Peterson said.

One change that Tennesseans may notice is that delivery charges now are included in the sale price of some items, said Ms. Harrell, meaning delivery charges can be taxed. Likewise, there are more tax exemptions on some medical items, she said.

Uncollected taxes have been a problem for states since the advent of sales and use taxes, Mr. Peterson said. Catalog and telephone sales have caused states to lose tax revenue because taxes are not always collected on these items, he said, and online sales have escalated the problem.

Owners of brick-and-mortar retail stores — who must collect sales tax on every transaction under the law — think that’s not fair, Ms. Harrell said.

“It hurts the revenues of the brick-and-mortar stores,” she said.

E-Fairness

More than two dozen retailers and retail associations are advocating sales tax changes by banding together in the E-Fairness Coalition, a Washington, D.C.-based group that calls for laws requiring all retailers to collect sales tax.

“Singling out Internet sales for tax exemptions while either maintaining current tax levies or shifting greater tax burdens to in-store retailers is clearly discriminatory,” states the coalition’s Web site. “The federal government should not create an elite class of merchants just because the transaction takes place on the Internet.”

Katie Reinsmidt, a spokeswoman for CBL Properties, which owns Hamilton Place mall, declined to comment, but she noted that CBL is a member of the E-Fairness Coalition.

Patty Smith, spokeswoman for online retailer Amazon, said the company is a proponent of the streamlined sales tax. She said Amazon wants things to be fair, but for it, too. Current sales tax laws present “an administrative burden” that may be too much to deal with for retailers such as Amazon, Ms. Smith said, because state laws now are so varied.

Ms. Smith said the company collects taxes in all the states in which the law requires it to do so.

Jonathan Johnson, president of retailer Overstock.com, said his company collects taxes in Utah, where Overstock is based. But he said he doesn’t think he should have to collect taxes for states where his company has no physical presence.

“We’re not using their system,” he said.

Mr. Johnson said a streamlined sales tax would help make the process easier, but it still would be rather difficult to work within every state’s system.

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