Under the new Streamlined Legislation that is set to take effect in Tennessee on July 1, 2007, Tennessee retailers are under NO obligation to collect the sales tax on behalf of states in which it has no physical presence, so where’s the potential Commerce Clause issue?

The Streamlined Legislation mostly just standardizes definitions and sourcing rules. However, the Streamlined Legislation also offers an incentive to retailers to voluntarily collect the tax – amnesty on past uncollected taxes.

As a side note, many TN taxpayers think that they “get out of” paying sales tax by purchasing expensive goods (e.g., engagement rings) and various online goods out of state. What they don’t realize is that there is a companion tax called the use tax that they are legally required to pay for the privilege of brining that item back to Tennessee – and it just so happens that the use tax is equal to the sales tax that would have been owed to the State had the purchase been made in Tennessee.

So, having out of state retailers buy into this Agreement is going to be good for TN (and all other participating states). Out-of-state retailers that voluntarily participate will remit money to the State that the State should have been receiving anyway.

I’d be interested to read your follow-up comments once you’ve had time to familiarize yourself with the SSTA, Tennessee’s sales and use tax scheme, and the pending Streamlined Legislation.