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May 4, 2007
Delegate Sheila Hixson, Maryland, Co-Chair
Streamlined Sales Tax Governing Board – Status Report
Senator Dwight Cook of North Dakota, President of the Streamlined Sales Tax Governing Board, requested that the Task Force provide guidance to the Governing Board regarding the issue of replacement taxes. The issue of replacement taxes was seriously debated last year in context of several states imposing a gross receipts tax on fur clothing, which would otherwise be included in the definition of clothing as defined under the Streamlined Sales and Use Tax Agreement (Agreement). While the issue relating to fur clothing has been resolved (a separate definition of fur clothing was adopted during the December 2006 Governing Board Meeting and the two states at issue have repealed their gross receipts tax on fur clothing), the issue of states circumventing the intent of the Agreement through replacement taxes remains a significant concern of the business community. The Task Force has agreed to take up the issue during the NCSL Annual Meeting in Boston, Massachusetts on August 4 and 5. The BAC will likely postpone any action on the issue of replacement taxes during the June Governing Board Meeting until the Task Force takes up the issue.
Scott Peterson, Executive Director of the Governing Board, reported that over $ 75 million in previously uncollected sales tax has been collected by the new out-of-state volunteer sellers for the members states of the Governing Board. He also reported that the Governing Board will take up 25 amendments in June, which deal with a number of issues, including: digital products, associate state member status and replacement taxes. The Task Force took action on the following issues:
Digital Products:
The Task Force reaffirmed its long standing position that there should be a separate definition for digital goods, independent of the definition for tangible personal property (TPP), added to the Streamlined Sales and Use Tax Agreement Library of Definitions. The decision to tax digital goods should be made by state legislators and not through interpretation of the state tax department. In addition, the Task Force expressed its opposition to the grandfathering of state treatment of digital products as TPP under the Agreement (an amendment set to be considered by the Governing Board in June would allow a state to grandfather existing treatment of digital goods as TPP).
Associate Member Status:
The Task Force affirmed its support for the extension of associate member status under the Agreement if the availability of associate member status confers an obligation upon an associate member state to move forward in complying with the Agreement, which should be measured by a performance-based standard. The performance standard should not make an explicit reference to time, though associate member status may otherwise be revoked if the state fails to make measured progress toward full compliance.
Replacement Taxes:
The Task Force has agreed to take up the issue of replacement taxes during the NCSL Annual Meeting in Boston, Massachusetts on August 4 and 5, and make a recommendation to the Governing Board thereafter. During the Task Force meeting, Steve Kranz, Vice-Chair of the BAC, said the BAC will likely postpone any action on the issue of replacement taxes during the June Governing Board Meeting based upon the Task Force taking up the issue. The next Governing Board Meeting is scheduled for September 2007.
Discussion of “Taxes and Fees on Communications Services”
Steve Stanek of the Heartland Institute and Scott Mackey of Kimbell Sherman Ellis discussed "Taxes and Fees on Communication Services," a recently released report authored by David Tuerck, Ph.D., Paul Bachman, Steven Titch, and John Rutledge. The report, published by The Heartland Institute and Beacon Hill Institute at Suffolk University, examines the taxes and fees imposed upon cable and phone services and calls for reform at the federal, state and local level. The report is available online at http://www.heartland.org/.
Telecommunications Tax Reform
The Task Force agreed to develop model legislation for state legislatures to establish study commissions to review the taxation of telecommunications services in their state. As each state taxes telecommunications differently, a study bill was deemed the most useful way to assist state legislatures in beginning the process to reform state and local telecommunication taxes.
Internet Tax Moratorium
The Task Force discussed possible action on the Internet Tax Moratorium, a prohibition on state taxation of internet access, which is set to expire in November of 2007. Several bills have been introduced in the 110th Congress, which would permanently extend the internet tax moratorium. The Task Force approved a motion to remain neutral on the issue of the moratorium.
NCSL State & Local Tax Academy Update
The Task Force also discussed the status of the NCSL State & Local Tax Academy, which is a program to educate and assist legislators and legislative staff in complying with or joining the Streamlined Sales and Use Tax Agreement, as well as assisting states with reform of telecommunications taxes. Steve Rauschenberger, Immediate Past President of NCSL, provided the Task Force with a sample agenda of an Academy session. NCSL is currently seeking public and private sponsorship of this endeavor. For additional information, contact Neal Osten (neal.osten@ncsl.org;202-624-8660) or Garner Girthoffer (garner.girthoffer@ncsl.org;202-624-7753).
NCSL Annual Meeting
The NCSL Task Force will next meet in Boston, Massachusetts, in conjunction with the NCSL Annual Meeting, August 4th (Noon to 5:00 pm) and 5th (9:00 am to Noon) The Task Force will discuss ongoing federal activities, replacement taxes and model legislation to study telecommunication tax reform in your state. The Task Force Dinner will take place on Saturday evening, beginning at 7:00 pm.
For additional information, contact Neal Osten (neal.osten@ncsl.org;202-624-8660) or Garner Girthoffer (garner.girthoffer@ncsl.org;202-624-7753).
Members Present: Del. Hixson, MD, Co-Chair; Sen. Bramble, UT; Sen. Cook, ND; Del. Doyle, WV; Sen. Fukunaga, HI; Sen. Jauch, WI; Rep. Jett, OK; Rep. Major, NH; Sen. Moore, MA; Rep. Steil, PA; Rep. Stone, DE; John O’Brien, TX;
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