The states hope to award the contract for building the central registration system by Mar. 4. The initial term of the contract is for one year, but it may be renewed for a term of up to four more years. The goal is to have the registration system running by October, according to Diane Hardt, co-chair of the Streamlined Sales Tax Project.
Certified tax software providers will remain eligible to calculate, collect and remit taxes for online sellers so as long as their products meet with the states' specifications. The project plans to announce the initial list of approved tax software vendors by Feb. 15 and award contracts by October 1.
Officials involved in drafting the project RFPs declined to discuss the potential value of the contracts. It also remains unclear how the states will pay for the central registration system, given that few Internet retailers are rushing to collect taxes voluntarily.
Hardt said the states could draw from a fund set up by sponsor organizations such as the National Governors Association and the National Conference of State Legislatures. Alternatively, the states may opt to take out a loan to pay the winning bidder up front, she said.
Until this year, the states participating in the sales tax project had planned for the central registration system to be built by the Multistate Tax Commission (MTC), a group of state and local tax administrators routinely hired by states to conduct tax audits on companies that do business in multiple states.
But in a meeting in Phoenix earlier this month, a number of Internet retailers and other companies that support the project cited fears that the MTC could use the sales tax data to conduct income tax audits of registered companies on behalf of non-participating states. They insisted that the task of creating the registration system be thrown open to competition.
"A lot of businesses said they didn't want anyone running the registration system who could use the information as an opportunity to go after merchants for other things," said Maureen Riehl, state and industry relations counsel for the National Retail Federation.
Frank Katz, general counsel for the MTC, said the group does not plan to submit a bid for building the registration system.
"We think those fears are completely unfounded, but we also don't want to do anything to stand in the way of what the states are trying to achieve," Katz said.
Maryland, Virginia and the District of Columbia are parties to the Streamlined Sales Tax Project but have not yet brought their tax laws into compliance with the project's guidelines. Officials from Maryland and Virginia have said they do not plan to take further steps until Congress indicates its support for the overall effort.
