Streamlined Sales Tax Implementing States

Streamlined Sales Tax Implementing States

Co-Chairs:
Representative Matthew Kisber, Tennessee
Commissioner Bruce Johnson, Utah

Provisions of Interstate Agreement Adopted by Implementing States as of June 15, 2002

Streamlined Sales Tax Project

Update on the Streamlined Sales Tax Implementing States

June 2002

By Graham Williams, NCSL

In January of 2000, the NCSL Task Force on State and Local Taxation of Telecommunications and Electronic Commerce drafted model legislation directing revenue department officials to engage in multistate discussions on potential ways for states to collectively streamline and simplify their sales and use tax systems. The goal was to reduce the burden of collection for all sellers and create a voluntary collection system for remote sellers with no requirement to collect and remit state sales taxes. In 2000, 32 states officially joined what became known as the Streamlined Sales Tax Project (SSTP) through legislative enactment of the model bill or executive order. The SSTP met monthly throughout 2000 and produced a set of recommendations for terms of an Interstate Agreement to achieve the aforementioned goals.

In the 2001 and 2002 legislative sessions, states have considered legislation to join the Streamlined Sales Tax Implementing States (Implementing States) to finalize the terms of the Interstate Agreement. The Implementing States, comprised of legislators, revenue department officials, governors' staff and private sector representatives will evaluate the recommendations of the SSTP, comments from the private sector and the political realities in the states to determine the final terms of the Agreement.

States can gain a vote on the terms of the Agreement as official members of the Implementing States by enacting either the Uniform Sales and use Tax Administration Act (drafted by the SSTP) or the Simplified Sales and Use Tax Administration Act (drafted by the NCSL Task Force), or a hybrid of the two. The major difference between the two versions is, whereas the SSTP version calls for the Director of Revenue to represent that state at meetings of the Implementing States, the NCSL version allows for four delegates to be appointed to collectively cast the state's vote. The NCSL Task Force felt it was important to offer an alternative that allowed for political and business input to the process that will ultimately require political will in the states for implementation. As of June 25, 34 states had officially joined the Implementing States through legislative enactment. Both houses in the Massachusetts Legislature had also passed the provisions of the model bill in their budget bills.

The first meeting of the Implementing States took place November 28-29, 2001 in Salt Lake City, Utah. At the inaugural meeting the group debated and adopted operating rules and elected leaders. The Implementing States elected Representative Matthew Kisber of Tennessee and Revenue Commissioner Bruce Johnson of Utah to serve as Co-Chairs. The group also set an ambitious timetable, striving to construct a final Interstate Agreement by mid-summer so states can begin drafting and even considering conforming legislation in the fall of 2002. In order to meet the timetable, the Implementing States will meet every four to six weeks.

The second Implementing States meeting took place on January 25, 2002 in New Orleans, Louisiana. To serve as a starting point for the final Interstate Agreement, the group adopted many of the terms that were substantially similar between earlier drafts of an Interstate Agreement by the SSTP and the NCSL Task Force. Among the provisions included in the base of agreement going forward are:

State Administration of State and Local Sales and Use Taxes
Limits on State and Local Rates and Rate Changes
Seller Registration
Uniform Sourcing Rules
Uniform Procedures for Exemptions
Uniform Tax Returns
Privacy Protections
Amnesty for Participating Voluntary Sellers
Outline of Models for Participation Through Technology
Outline for Monetary Allowances Based on Technology Models

From this starting point, the Implementing States have added provisions, issue by issue, continuing to build up to a comprehensive Agreement that represents a significantly simplified and streamlined sales and use tax system.

The third meeting of the Implementing States took place March 15-16, 2002 at the Le Meridien Hotel in Dallas, Texas. The Implementing States heard public comment, debated and acted on several new issues, adding language to the agreement on the following items:

Telecommunications Sourcing
Privacy Clarifications
Uniform Administrative Definitions

-'"Sale", "Purchase Price", "Delivery Charge", etc.

Uniform Definition of Food and Related Items

-"Food", "Prepared Food", Candy" and "Soft Drinks"

The fourth meeting took place April 12-13, 2002 in Dearborn, MI. The Implementing States heard public comment, debated and acted on several new issues, adding language to the agreement on the following items:

Limits on State and Local Rates after December 31, 2005:

Local jurisdictions limited to a single rate per jurisdiction
States limited to a single general rate with an option of a single additional rate, that could be zero, on product categories specifically defined by the Implementing States

Standardization for sales tax holidays
Elimination of caps and thresholds after December 31, 2005
Uniform Definition for Leasing
Uniform Definition for clothing
Rounding Rule

The fifth meeting took place May 17-18 in Oklahoma City, OK. The Implementing States took action on the following items:

Uniform Definition for Tangible Personal Property
Uniform Definition for Software
Uniform Definition for Drugs
Uniform Definition for Medical Equipment

At the Oklahoma City meeting, the Implementing States also began discussions on how the Agreement would be governed by member states.

The most recent meeting took place June 14-15 in Baltimore, MD. In Baltimore, the Implementing States continued to work on an appropriate governance structure as well as work on the following items:

Refined limits on second state rates to food and/or drugs
Refinements to the Prepared Food Definition
Discussion of a Preamble for the Use of Uniform Definitions

The next meeting is scheduled for July 11-12 in Salt Lake City, UT. Remaining issues for the Implementing States to resolve are:

Governance
Customer Remedy Procedures
Placement of the Definitions
Preamble to the Definitions
Drafting of the Agreement

Upon completion and adoption by three-fifths of the Implementing States, the final Interstate Agreement will be presented to the state legislatures for consideration. Nothing in the Agreement will bind any state to take any action, rather a state that wishes to participate will need to make the necessary statutory changes to comply with the terms of the Agreement. Ultimately, the decisions of the Implementing States will derive from the tensions from the need for simplicity to create a burdenless system and the need for a sufficient number of participating states to make the system attractive to volunteers. The final level of simplicity will also impact the cost of providing the technology by the states. It is therefore important for any state that is interested in one day joining such an uniform agreement to be at the table when this balance is struck.

For more information:

Neal Osten
Senior Committee Director
NCSL, Washington Office
202.624.8660

Graham Williams
Policy Specialist
NCSL, Washington Office
202.624.8683

Salt Lake City Meeting (July 12-13, 2002)

Registration
Agenda
Issue Papers
Balitmore Meeting (June 14-15, 2002)