Factors leading to state participation in the streamlined sales tax project

The loss in sales tax revenue from nontaxable remote sales erodes a state’s ability to fund essential programs. Taxable goods sold via the Internet in 1999 created a loss to state and local governments of $525 million in sales tax revenue. This study examines the effects of five variables on a state’s willingness to participate voluntarily in the Streamlined Sales Tax Project (SSTP). Three hypotheses are supported: 1) the higher the grade on the Business Vitality score, the more likely elected officials will be influenced by the private sector and state economic development personnel not to participate in the SSTP; 2) the higher the index of innovation capacity, the more likely elected officials will be influenced by businesses not to participate; and 3) the greater the reliance on sales tax, the more likely a state will participate.