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Streamlined-Sales-Use-Tax Streamlined Sales and Use Tax Agreement Overview GFOA Annual Spring Conference Paul Harper Deputy General Counsel, Taxation Division Topics for Discussion • History of the Streamlined Sales and Use Tax Agreement (SSUTA) • What does SSUTA do? • What changes would occur if Missouri passed SSUTA conforming legislation? • What efforts are being made at the federal level? Remote sales • US Department of Commerce, Census Bureau, estimates that as of 4th Quarter 2011 e-commerce accounts for 4.3 percent of all sales, and that e-commerce sales increased 16.1 percent from 2010 • State and Local Government Sales Tax Revenue Losses from Electronic Commerce, April 2009 report from the University of Tennessee reports that state and local governments will fail to collect $6.9 billion in sales and use taxes in 2009 from just e-commerce Why doesn’t the seller always collect? • For decades, states have attempted to require out-of-state retailers to collect sales and use taxes • The Nexus Issue • Quill Corp. v. North Dakota – The 1992 U.S. Supreme Court decision held that requiring out-of-state retailers with no physical presence in the state would burden interstate commerce and violate the Commerce Clause What retailers say makes the system complex • State and local tax administration in some states • Unclear rules on who has the right to tax a transaction • Too many tax rates within each state and locality • State and locals tax different items • Too many definitions for the same product • The retailer is liable when a buyer lies or fails to provide proof of an exempt sale Streamlined Sales and Use Tax Agreement (SSUTA) • State reaction to Quill Corp. v. North Dakota • Created by National Governor’s Association and the National Conference of State Legislatures to simplify state sales and use tax laws • Began March 2000 • SSUTA effective October 1, 2005 Streamlined State Status 08-01-11 21 Full Members 3 Associate Members Stated goals of the streamlined effort • Create a simpler system for administering the various state and local sales taxes • Make processes uniform if they cannot be made simple • Balance the interests of a sovereignty with the interests of simplicity and uniformity • Leverage the use of technology to ease the retailer’s tax collection What Does SSUTA Do? Tax Law Simplification • Uniform definitions • Uniform base • Uniform exemption administration • Rate simplification and state-level administration of all sales and use taxes • Central registration system • Simplified electronic filing Uniform Sourcing Rules Destination based sourcing. Optional origin-based sourcing. Uniform Notice Rules Must become effective on first day of calendar quarter. Must provide minimum 60 days notice of changes to local boundaries or rates. Protection of Consumer Privacy Several states, including North Carolina and Colorado, have passed laws requiring sellers to report to the state the identity of the customers and the amount of sales to each customer. Certified Service Providers (CSP) • CSP is a third party that provides “cradle to grave” tax service that includes liability determination, return filing, and tax remittance • Businesses who volunteer to collect tax in state may use CSP’s at no cost—states pay CSP for services to volunteer sellers • Currently six CSPs have contracts with the Governing Board Amnesty • Sellers who register to collect tax receive amnesty against liability for prior sales regardless of nexus • The state must offer the amnesty from date it joins the Governing Board until one year after it has been a full Member State Amnesty (continued) • The amnesty is not available – To any seller that has received an audit notice from a state – To any seller who was registered with state during preceding year – To any seller that is being audited • Sellers must remain registered and collect sales tax for 36 months • The amnesty only applies to the seller’s sales tax liability Top Changes To Missouri Law If Passed Uniform Tax Base • Sales and use taxes must have uniform base, except “fuel used to power motor vehicles, aircraft, locomotives, or watercraft, or to electricity, piped natural or artificial gas or other fuels delivered by the seller and the retail sale or transfer of motor vehicles, aircraft, watercraft, modular homes, manufactured homes, or mobile homes” Uniform Tax Base (continued) • All exemptions and exclusions must apply equally to state and local sales and use taxes • All sales tax holidays must apply equally to state and local sales and use taxes Changes to Definitions • SSUTA provides for uniform definitions • If SSUTA provides a definition, then the state must adopt that definition to exempt the product or category • If SSUTA does not provide a definition, then the state may adopt specific exemptions – SSUTA has no impact on manufacturing or agricultural exemptions Changes to Definitions (continued) • Food and food • Drugs ingredients • Durable Medical • Prepared food Equipment • Candy • Computer Software • Soft drinks • Prewritten • Dietary supplement Computer Software • Clothing • Delivered Electronically • Lease or rental • Load and Leave • Tangible personal property • Sales Price • Bundled Transaction • Specified digital products New Databases • Database matching tax rates to local jurisdictions • Database of boundary information for local jurisdictions • Taxability matrix that identifies whether defined products are exempt or taxable under the state’s laws Hold Harmless Provisions • Reliance on taxability matrix • Reliance on rate and boundary database • Reliance on exemption certificates taken in good faith Uniform interpretations of sales and use tax laws • Each state’s laws, rules, regulations, and policies must remain substantially compliant with SSUTA • Interpretations by the Governing Board become a part of the agreement Federal Efforts Competing Federal Bills Mainstreet Fairness Act Marketplace Equity Act • S 1452 and HR 2701 • HR 3179 • Requires full membership • Does not require SSUTA in SSUTA for the authority membership to require collection by all • Requires single retailers administrator of tax • Requires states to pay • Requires uniformity of compensation to all base retailers • Requires small seller • Requires states to exception establish an exception for • Requires either single small sellers blended rate, maximum • Creates federal court state rate, or applicable review for Governing destination rate Board action Marketplace Fairness Act • S. 1832 • Compromise between Mainstreet Fairness Act and Marketplace Equity Act • Requires either full member of SSUTA or simplification of sales and use tax laws Marketplace Fairness Act (continued) • For non-SSUTA full members, requires – Single state-level administration and collection – Single state-level audit – Single state level return – Uniform base – Adequate software and services to determine the destination rate, certification for providers, and hold harmless provisions for relying on state data – 30 days notice for rate changes – Small seller exception Fair Tax Dave Zanone Manager, Sales/Use Tax “Fair Tax” Proposals Common Provisions • Eliminates or phases out individual and corporate income taxes • Eliminates existing sales and use tax, including exemptions • Establishes a new sales tax on property and services • Some proposals provide a rebate for low income taxpayers “Fair Tax” Proposals Common Provisions • Allows political subdivisions to broaden their base and adjust rates • Eliminates tax credits • A one time adjustment to the rate may be made to ensure revenue collected is equal to revenue collected in a previous fiscal year • Provides specific sales tax exemptions for certain industries “Fair Tax” Proposals Common Provisions Exemptions • Sales of personal property already taxed • Services performed by an employee for their employer • Stocks, bonds, and other intangible personal property held for investment • Real property • Motor fuel “Fair Tax” Proposals Common Provisions Exemptions • Tuition and fees for elementary, secondary, vocational, and higher education • Insurance premiums • Sales or services used for agricultural trade or business • Health care • Purchases for a business purpose “Fair Tax” Concerns • Expanding the sales tax base will significantly increase the number of businesses that will need to register with the Department –will need additional staff to process applications • The number of sales tax returns filed will dramatically increase • If income tax is phased out over a period of years, the personnel used to administer those tax types will not be available to help administer the expanded sales tax “Fair Tax” Concerns (continued) • There is no empirical basis to suggest a 7% tax will generate sufficient revenue • There is no specific provision included that requires the vendor collect the tax • There is no specific provision which provides the Director authority to audit, assess, or issue refunds “Fair Tax” Concerns (continued) • If the existing taxes are eliminated it may affect refund claims that have not been processed and delinquencies that have not been collected • There is no direction provided that details how holders of tax credits can redeem or be compensated for the value of the outstanding credit amounts “Fair Tax” Status • SJR 35-Referred to Senate Ways and Means Committee-The committee has not held a hearing on the resolution • SJR 34-Referred to Senate Ways and Means Committee-The committee has not held a hearing on the resolution • HJR 69-The resolution has not been assigned to a committee “Fair Tax” Status • HJR 74-Referred to House Tax Reform Committee- The committee has not held a hearing on the resolution • Initiative Petitions-The Department has not been able to determine if any petitions will be placed on the November ballot Streamlined Sales and Use Tax Agreement Overview Paul Harper Deputy General Counsel Questions? Taxation Division PO Box 854 Jefferson City, MO 65105 [email protected] (573) 522-3769 (573) 526-2019 FAX Thank You .
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