Multistate Tax Committees to Mull Updates for Model Laws, Rules

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Tripp Baltz and Ryan Prete

Changes to draft model apportionment rules and e-commerce tax reporting and notice laws will be on tap at a meeting of the standing Multistate Tax Commission committees in New Orleans Nov. 15-17.

The commission’s Uniformity Committee also will take up a proposed model uniform statute and regulation for reporting adjustments to federal taxable income and federal partnership audit adjustments, which responds to the new federal partnership audit regime. And the Nexus Committee will receive an update on its voluntary disclosure initiative, which provided a waiver of back tax liability to online marketplace sellers if the sellers registered between Aug. 17 and Nov. 1 to start collecting state sales and use taxes going forward.

The annual committee gathering focuses on the MTC’s model rules and laws for states to follow when pursuing uniformity in multi-jurisdictional tax administration. The meeting sets the table for the commission to vote on proposed changes to the Multistate Tax Compact and other commission business at its annual meeting in 2018.

Reporting and Notice

During the Uniformity Committee meeting Nov. 16, a Sales and Use Tax Information Reporting work group is scheduled to present the latest version of a draft model use tax information reporting and notice statute, which used a 2010 Colorado law as its starting point.

The Colorado law, which was affirmed as constitutional by the U.S. Court of Appeals for the Tenth Circuit in February 2016, requires sellers that don’t collect and remit Colorado sales and use taxes to (1) notify buyers at the time of transaction that tax is not being collected but may be due, (2) provide consumers an annual report of their purchases, and (3) send an annual report showing total dollar amount of each buyer’s purchases.

The latest version of the draft MTC model provides new definitions for “marketplace,” “marketplace facilitator,” “referrer,” and “seller,” and spells out obligations for those entities to give transactional notice to buyers and file reports with state administrative tax agencies.

Apportionment, Voluntary Disclosure

The Uniformity Committee will also consider a second work group’s proposed amendments to Section 18 of Article IV of the compact, the Uniform Division of Income for Tax Purposes Act, which addresses apportionment situations involving taxpayers with no or low receipts. The Section 18 changes are necessary in light of the commission’s recent adoption of changes to Article IV sections 17 and 1, which reflect a shift in many states toward market-based sourcing for purposes of apportioning business income.

The Nexus Committee’s Nov. 15 meeting will cover the voluntary disclosure program, including discussion on whether to offer the amnesty program again, Richard Cram, director of the MTC’s National Nexus Program, told Bloomberg Tax. Some 852 third-party marketplace sellers who use platforms such as Amazon.com Inc., eBay Inc., and Etsy Inc. applied to the program, Cram said.

The MTC saw its nexus processing staff rise from two to seven people after the flurry of applications flooded the committee in the final days of the registration window, which ran from Aug. 17 to Nov. 1. Cram told Bloomberg Tax in early November that he hopes to provide information on the sales volume of some vendors at the committee meeting.

Partnership Proposal

During the Uniformity Committee meeting, a coalition of industry groups is expected to discuss their draft model statute and regulation for states to adopt next year. In addition to addressing the federal partnership audit regime, which generally provides for assessment and adjustments at the entity level, the proposal also provides changes to the MTC’s model on reporting federal adjustments.

The industry groups, which pitched the model statute and regulation to the MTC, include the Council On State Taxation, the Tax Executives Institute Inc., the Institute for Professionals in Taxation, the American Institute of CPAs, and a task force of the American Bar Association tax section’s State and Local Tax Committee.

The new federal partnership audit regime, enacted through the Bipartisan Budget Act of 2015, takes effect Jan. 1.

With assistance from Che Odom in Washington

To contact the reporter on this story: Tripp Baltz in Denver at abaltz@bna.com and Ryan Prete in Washington at rprete@bna.com

To contact the editor responsible for this story: Cheryl Saenz at csaenz@bna.com

For More Information

Agendas for the MTC's fall committee meetings are at http://src.bna.com/udb.

Copyright © 2017 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State