Sunday, November 27, 2005
Dwight Denison (NYU, Robert F. Wagner Graduate School of Public Service) & Rex L. Facer II (BYU, George W. Romney Institute of Public Management) have published Interstate Tax Coordination: Lessons from the International Fuel Tax Agreement, 58 National Tax Journal 591-603 (Sept. 2005). Here is the abstract:
A growing concern over lost sales tax revenue on remote sales transacted through the Internet has motivated many states to explore cooperative tax agreements for sales and use taxes. With the support of the National Governors Association (NGA) and the National Conference of State Legislatures (NCSL), an ambitious and controversial project known as the streamlined sales tax project (SSTP) has emerged to propose principles for sales tax coordination. While SSTP is currently center stage in tax cooperative agreements, another cooperative agreement, the International Fuel Tax Agreement (IFTA), was initiated over 20 years ago. The agreement has evolved significantly through the years and currently the 48 contiguousU.S. states and 10 Canadian provinces have signed the agreement. The purpose of this paper is to describe the history, background, and incentives that have led to IFTA's success. We show how the combination of improved tax administration and lower transaction costs play a critical role in thesuccess of IFTA. Last, we identify lessons from IFTA that have relevance for other tax coordination agreements.