Sourcing Rules Workgroup Notes Workgroup Call - March 18, 2009

Bill Riesenberger - OH John Kroll - CASTLE Jane Page - SD Fred Nicely - COST Scott Peterson - SST Mark Nebergall - SoFTEC Judy Niccum - MN Carolynn Iafrate Robin Corrigan – TX Beth Ann Kendzierski – Apria Healthcare Greg Potegal – WA Kathy Neggers - GE Sherry Harrell– TN Keith Simeral - IBM Mark Haskins – VA Justin Short Christie Comanita – AZ Deb Bierbaum – AT&T

This committee was formed to address concerns regarding 310.1 C 7: sourcing tpp & services in same invoice differently. 310.1 allows an origin state to source tpp to origin on Intrastate sales, but services are still taxed as destination under 310.

The committee has not received any scenarios from the business community with respect to 310.1C7 and the work group needs scenarios to begin working on this.

Mark Nebergall noted that 310.1 C7 is not operative until 2010 and then not unless 5 new origin states join. This discussion may be able to wait for the section to become effective. It was decided that it would be best to work on this anyway since some states already have adopted 310.1 or will do so before it becomes effective.

In an origin state if a service is invoiced with tpp will the sourcing on that billing for the service change to origin? This may be confusing to businesses, especially small ones.

Robin Corrigan stated that TX sources some services origin and some destination; they will want to discuss applying 310.1 to intrastate services. Jane Page noted that SD & IA source soil testing differently although both states are destination.

Should this committee discuss services performed on tpp separately from services not performed on tpp? It might be an easier way to start the process. A paper on this was started in 2004. Everyone needs to review the Sourcing Of Services Work Group Paper of October 2006. Bill Riesenberger will send it out.

This committee should look at three issues: 1. 310.1 C7 – when services are sourced differently than tpp and they are on one invoice. 2. 310.1 expand to services with an amendment 3. application of 310 to services – need to prepare rules

Committee will do an expanded sourcing survey to ask about Interstate and Intrastate services are taxed. Also ask if there are court cases on sourcing in a state.

Carolynn Iafrate, Mark Nebergall and Fred Nicely indicated they would have a business call in the next two weeks to discuss these issues and report back.

This committee will be on the agenda for the SLAC meeting in May.