|
March 12, 2007
The Honorable Dwight Cook
North Dakota Senate
1408 17th Street, SE
Mandan, North Dakota 58554-4895
The Honorable Joan Wagnon
Secretary of Revenue
915 South West Harrison
Topeka, Kansas 66612
RE: Letter regarding the views of the Task Force on the amendments to the Streamlined Sale and Use Tax Agreement set to be considered by the Streamlined Sales Tax Governing Board on March 16th and 17th in Charlotte, North Carolina.
Dear Senator Cook and Secretary Wagnon:
As you are aware, the National Conference of State Legislatures (NCSL) Executive Committee Task Force on State and Local Taxation of Telecommunications and Electronic Commerce (Task Force) met January 19, 2007, to review the current status of the streamlined sales tax process in the states, recent actions by the Streamlined Sales Tax Governing Board, the State and Local Advisory Council (SLAC), the Business and Advisory Council (BAC) and to discuss the proposed amendments to the Streamlined Sale and Use Tax Agreement set to be considered by the Streamlined Sales Tax Governing Board on March 16th and March 17th in Charlotte, North Carolina. This letter will serve to provide you and the members of the Governing Board with the views of the members of the Task Force with regard to these issues.
The Task Force commends you and the members of the Governing Board, SLAC and BAC for your diligence and dedication in ensuring and enhancing the start-up and operation of the Streamlined Sales Tax System. We are pleased to see that system is working and you all can share the credit for a process that includes twenty-one states, over 1,000 volunteer sellers and now accounts for over $55 million in new revenues for state and local governments which previously would have gone uncollected. These preliminary results will assist the Task Force’s efforts in seeking federal legislation to give states the authority to require out-of-state sellers to collect sales taxes upon a state’s compliance with the Streamlined Sales and Use Tax Agreement and assist other states to move forward in enacting compliance legislation.
The NCSL Task Force supports amending Section 806 of the Streamlined Sales and Use Tax Agreement to require that at least one representative from each member state shall be an elected member of the state’s legislative body. The Task Force believes that by requiring state legislative participation by each member state will help to ensure that Governing Board decisions are made by state policymakers and also assure legislative willingness to consider amendments to the Agreement that require state statutory changes.
The Task Force also supports amending Section 806 of the Agreement to clarify that representatives shall be members of the executive and legislative branches and/or other branch of state government mandated by the state’s constitution. The Task Force wants to ensure that in those states where there may be a question as to whether state officials from a separately elected state office or commission independent from the state’s governor would still qualify for membership on the Governing Board, even though those officials may not be considered to be part of the executive branch. For example, Task Force members were concerned that the existing language in Section 806 might preclude members of the Comptroller’s Office in Texas or the Board of Equalization and Assessment in California from serving on the Governing Board.
As we have stated in our previous two letters to the Governing Board, we must reiterate the Task Force’s support for a separate definition for digital goods, independent of the definition for tangible personal property, to be added to the Streamlined Sales and Use Tax Agreement Library of Definitions. We believe that the decision to tax or not tax any item should be decided by each state’s elected policymakers and not through departmental or administrative interpretation. We would urge the Governing Board to immediately caution state tax departments from interpreting or extending definitions to include other items as such actions violate the intent of the Streamlined Sales and Use Tax Agreement.
The Task Force is concerned about actions in some member states to enact “replacement taxes” in order to maintain a sales-like tax on a certain product within an approved definition of the Agreement, that the state has exempted from taxation. While we can understand the desire to maintain a sales tax on what may be classified as a “luxury” item within a definition class where most of the other items are considered essential; doing so however, puts the states right back where we started, with a burdensome and complex tax collection system for which it becomes too costly for sellers to comply. The Governing Board must send a strong message that member states that choose to enact a replacement tax could jeopardize the state’s compliance to the Agreement. On behalf of the Task Force, we are preparing a letter to legislative leaders and chairs of the appropriate fiscal committees informing them that enacting replacement taxes violates the fundamental purpose of the Agreement as stated in Section 102 and will make it much more difficult for the states that have complied to the Agreement to be given collection authority for all out-of-state sales by Congress. A replacement tax coupled with the streamlined sales tax system establishes a bifurcated collection system in which nexus requirements do not go away.
Finally, the Task Force discussed at length the amendment process as well as the governing process of the Agreement. As you are aware, concerns were raised regarding the number of proposed amendments to the Agreement, the process of considering amendments and the implementation of adopted amendments by member states in order to maintain compliance to the Agreement. The Task Force as well as all participants in this process acknowledge that the Agreement will need to be amended from time to time to reflect matters that were not finalized when the Agreement was approved in November of 2002, as well as to address new products and changes in technology. However, concerns have been raised with regard to the large number of amendments that have been considered since November 2002
The Task Force would respectfully request that the members of the Governing Board be judicious in proposing amendments to the Agreement that will require statutory changes by member states’ legislatures. The Task Force also supports limiting consideration of amendments to the Agreement to the annual meeting of the Governing Board.
On behalf of the members of the NCSL Task Force, we express to you our appreciation for taking on the responsibility of building the foundation for a viable streamlined sales tax system. We thank you for taking the concerns of state legislators under consideration and welcome the opportunity to discuss them further with you. Please know that you are always welcome to come before the Task Force with your concerns.
Sincerely,
| Speaker Christopher Rants, Iowa |
Delegate Shelia Hixson, Maryland |
|
Co-Chairs of the NCSL Executive Committee Taskforce on State and Local Taxation of Telecommunications & Electronic Commerce |
|
CC:
Delegates Streamlined Sales Tax Governing Board
Streamlined Tax Implementing States
State and Local Advisory Council
Business Advisory Council
|
