While Congress considers the online sales tax provisions of the Marketplace Fairness Act (S. 743), the leading proponent of the idea is already at work addressing implementation for states in the event of passage.
At its spring meeting held May 15-16, the Streamlined Sales Tax Governing Board (SSTGB) considered amendments to the Streamlined Sales and Use Tax Agreement (Agreement), which states may adopt to bring simplification and uniformity to the collection, remittance, and administration of their sales and use taxes. Among the amendments was a bid to ease compliance requirements for member states by allowing them to adopt "best practices" instead of amending their tax laws.
Under the bill as currently drafted, states adopting S. 743's minimum simplification requirements would have no additional requirement to adopt the Agreement. As such, the amendments to the Agreement currently under consideration by the SSTGB would serve to reduce disincentives for new states to join the Agreement and for member states to comply with its provisions. The proposed amendments arguably work to retain some relevance for the Agreement, Todd Lard, a partner at Sutherland Asbill & Brennan LLP in Washington D.C., noted, "although with the 'best practices' amendment there is perhaps an eroding away from uniformity."
'Best Practices' Amendment Advances
The SSTGB is currently moving forward for a second vote regarding proposed amendments to the Agreement that would add a new section relating to "best practices," as well as a requirement for states to complete a "best practice matrix." By a vote of 13 to 7, the SSTGB changed Proposed Amendment AM13001A02, substituting the term "best practices" for "common practices."
In addition, the SSTGB approved revisions to a best practices matrix amendment by a vote of 18 to 1, placing it under an existing section of the Agreement relating to the taxability matrix (Proposed Amendment AM13004A01).
Thus, under the proposed amendments: "Best practice" is defined as a practice identified and adopted by the SSTGB in the administration of sales and use taxes in member states with respect to certain products, procedures, services, or transactions. A best practice, which can be approved by a majority vote of the SSTGB and is subject to a comment period (rather than a three-fourths vote required for Agreement amendments), would become an appendix to the Agreement.
In distinguishing between best practice and Agreement, Lard stated that, while member states are "encouraged" to comply with a best practice, a member state need not amend its sales tax laws to comply with any given best practice; compliance is voluntary.
However, all member states would be required to annually complete a best practices matrix showing how their statutes differ from the best practice, if at all.
Passage of the proposed amendments would require three-quarters of the member states' approval in order to become part of the Agreement.
Central Registration System
With more than $1 billion in online sales taxes collected by member states to date, the SSTGB is looking to upgrade its centralized registration system in anticipation of the influx of new members. Currently, 24 states participate voluntarily in remote sales tax collection through this centralized system.
Richard Dobson, who chairs the Federal Legislation Implementation Committee, said he anticipates that, in the event of congressional passage of S. 743, nonmember states will come in and use the SSTGB's central system because of the expertise and information the organization can provide, and "there is value from a seller standpoint to come to one system."
Certified Service Providers Weigh In
If enacted, S. 743 would require states to provide online retailers with the software necessary to calculate and remit the tax to the state where the good or service is purchased. At the meeting, the SSTGB heard from three certified service providers (CSPs) that provide the technical infrastructure and support necessary to enable the remote sales tax collection system.
Representatives of the CSPs (Charles D. Collins Jr., director of government affairs for Taxware; Scott Peterson, director of government affairs for Avalara; Joan Wagnon, executive vice president of FedTax; and Russ Brubaker, FedTax vice president of government relations) noted that they have traveled to many non-streamlined sales tax states, explaining the workings of the streamlined centralized registration system.
Their message to the states was one of tax simplicity: "We tell them we are in business of helping their retailers comply with everybody else's sales tax, and their own sales tax," Peterson said.
Two questions they most frequently encounter, the representatives told the SSTGB, are "How much will it cost to sign up for central registration?" and "When can they join?"
Brubaker urged the SSTGB to "have a discussion and set a price," so that potential new states can make decisions about registering.
In other developments…
State Budget Update: Spring 2013 , by the National Conference of State Legislatures
State Unemployment Rates Decline in April 2013 , by the National Conference of State Legislatures
Initial Window for Delaware Unclaimed Property VDA Opportunity Closes June 30, 2013 , a new alert by Morrison & Foerster LLP
Another Perspective on the Apple Hearing , by the Tax Foundation
Compiled by Priya D. Nair
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