sst governing board meeting, use tax reciprocity and proposal for digital goods (oct. 6, 2011)

8/3/2019 SST Governing Board Meeting, Use Tax Reciprocity and Proposal for Digital Goods (Oct. 6, 2011)

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Bottom Line Up Front

This method provides a mechanism to collect use taxalready owed on internet purchases that waspreviously uncollectable.

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Use Tax Laws States should address Main Street Fairness via extant

authority to collect use tax and regulate commercewithin the state.

Requires no federal action and no streamlining oflaws, therefore states may begin immediately.

Creating a single sales data facility used by all use tax

states provides the mechanism to collect use tax oninternet transactions.

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Tax Collection TechniqueVendor

SSTGB Consumer

States

SalesData

TaxInvoice

Payment

States

Bill

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Regulation-Reporting Requirement Each state requires companies with a nexus to

periodically report sales data.

Companies report sales data annually (or certify that ithad no transactions in which it did not collect salestax).

How to create the requirement depends on the state:

Regulatory change made by Dept. of Revenue andapproved by Ways and Means, or

Legislation.

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Regulation - Summarized Require companies with a nexus to report sales data.

Require those companies to post on their sale confirmationpage that untaxed sales may be subject to use tax.

Designate the SSTGB an agent of the State Dept. ofRevenue for this purpose, allowing them to collateinformation on sellers and buyers on a national level.

Authorize collection of unpaid use tax on income tax

filings. States protect tax revenues by barring the data from being

used for any other purpose not related to sales and use taxcollection.

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Information Needed Billing name and address - used to identify the

purchaser.

Shipping address - used to identify the taxjurisdiction.

Brief description of goods, usually 1 or 2 words each -to determine taxability.

Cost of goods - to determine tax owed.

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The Technique

Data Reporting Data Extraction Companies use their sales database

to extract a sales summary into a file (.txt or .csv)Upload - Data files will be uploaded to a secure serverand pass to the SSTGB.

SSTGB uses a CSP or CAS to determine tax liability.

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Follow the Sales DataVendor

State Dept.of Revenue

Website

States

CSP

SalesData

PassesthroughSSTGB

Consumer

Total TaxLiability

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Paying Use Tax - Consumer Internet transactions shall continue as normal,

without taxation at the point of sale.

Consumers will receive a notification of use tax owedconcurrent to income tax filing.

Consumers use tax liability is incorporated into thestate income tax form.

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Benefits - States Requires no streamlining or federal action.

Levels the playing field.

States collect based on authority to collect use tax andregulate/audit its corporations and businesses.

Each state enforces compliance of its own businesses,for the benefit of every other state.

By working together, each state ensures maximumcollections for itself.

Removes the need for a small business exemption.

No reliance on consumer self-reporting.


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Benefits - Vendors No implementation costs for vendors.

Almost no administrative time for vendors (less time

than it takes to collect and remit sales tax). Much easier for a business to implement than using

CSPs.

Must relieve vendor from the liability of incorrectly

collecting taxes across many jurisdictions.

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Potential Criticisms Security and Privacy-Protecting consumers shopping

habit info

These are the same issues that are extant under thecurrent Point of Sale model.

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More on Privacy No agent of any state should ever view the purchases of any

individual. All tax calculations should be automated in such a way that

no one sees the name of any consumer. Tax information remitted to states should only include

identifying information and total use tax owed (noinformation on shopping habits).

If a consumer contests his use tax liability, any audit shouldbe performed by an outside agency, and individualsperforming the audit should certify that they do not knowthe person contesting the bill.

These rules will protect the states and the SSTGB frominvasion of privacy lawsuits.

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Amazon LawsAmazon and similar sites will not report sales data if

items were sold through an affiliate.

All affiliates of Amazon and similar sites will reportsales in their respective states.

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What it is not This project does not completely replace the need for a

national solution

Non-use tax states have little incentive to participate. it creates the ability to collect almost all of the use tax

owed.

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Implementation StructureTechnique

CSP

SSTGB

Licenseuse of thetechnique

Contract toperformcalculations

States

Join the agreementas regulations areimplemented

States

States

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More on Reporting Regulation States should only require companies to report

transactions in which the purchasers state is also aparty to the reciprocity agreement, i.e. both the sellerand buyer are regulated by their respective state.

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More on implementation SSTGB will require few additional resources, primarily

the ability to monitor state implementation and CSPcontractors.

States will require few additional resources, primarilythe ability receive/forward data and mail invoices toconsumers once yearly.

Collection becomes more efficient as more states join.

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Summary & Next Actions Investigate creating a reporting regulation in your

state.

Explore partnerships with a CSP.

Follow up at the next meeting.

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Questions?

Use Tax Reciprocity

sst governing board meeting, use tax reciprocity and proposal for digital goods (oct. 6, 2011)

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