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Streamlined Streamlined Sales Tax ProjectSales Tax Project

Policymakers’ BriefingPolicymakers’ Briefing

Rosemont, IllinoisRosemont, Illinois

September 6, 2000September 6, 2000

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Streamlined Sales Tax ProjectStreamlined Sales Tax Project

BackgroundBackground

• Simplification ProjectSimplification Project

• National Tax Association ProjectNational Tax Association Project

• Advisory Commission on Electronic Advisory Commission on Electronic CommerceCommerce

• National Governors’ Association National Governors’ Association ProposalProposal

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Streamlined Sales Tax ProjectStreamlined Sales Tax Project

Project Focus - ModernizationProject Focus - Modernization Project VisionProject Vision

• Simplification and UniformitySimplification and Uniformity Project MissionProject Mission

• To develop measures to design, test, To develop measures to design, test, and implement a system that radically and implement a system that radically simplifies sales and use taxessimplifies sales and use taxes

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Streamlined Sales Tax ProjectStreamlined Sales Tax Project Project OrganizationProject Organization

• Steering CommitteeSteering Committee–Seven MembersSeven Members

• MI, MO, NC, SD, TN, WI, and WYMI, MO, NC, SD, TN, WI, and WY

• Work GroupsWork Groups

• Project MeetingsProject Meetings–Seven MeetingsSeven Meetings

• Denver (2), St. Louis, Chicago (3), Denver (2), St. Louis, Chicago (3), San AntonioSan Antonio

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Participating States (26)Participating States (26)Arkansas Minnesota Rhode IslandArkansas Minnesota Rhode Island

Florida Mississippi S. CarolinaFlorida Mississippi S. Carolina

Illinois Missouri S. Dakota Illinois Missouri S. Dakota

Iowa Nebraska TennesseeIowa Nebraska Tennessee

Kansas New Jersey UtahKansas New Jersey Utah

Kentucky N. Carolina West VirginiaKentucky N. Carolina West Virginia

Louisiana N. Dakota WisconsinLouisiana N. Dakota Wisconsin

Maryland Ohio WyomingMaryland Ohio Wyoming

Michigan OklahomaMichigan Oklahoma

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Observer States (13)Observer States (13)

Alabama IndianaAlabama Indiana

California MaineCalifornia Maine

Colorado NevadaColorado Nevada

Connecticut PennsylvaniaConnecticut Pennsylvania

Georgia TexasGeorgia Texas

Idaho Vermont Idaho Vermont

WashingtonWashington

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Work GroupsWork Groups Technology, Audit, Privacy and Technology, Audit, Privacy and

Paying for the SystemPaying for the System Tax Base Uniformity and Exemption Tax Base Uniformity and Exemption

AdministrationAdministration Tax Rates, Registration, Returns and Tax Rates, Registration, Returns and

RemittancesRemittances Sourcing and Other SimplificationsSourcing and Other Simplifications

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Technology, Audit, Privacy, and Technology, Audit, Privacy, and Paying for the SystemPaying for the System

Technology solutions Technology solutions Privacy of purchasersPrivacy of purchasers Audit and certification standardsAudit and certification standards Paying for systemPaying for system

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Technology, Audit, Privacy, and Technology, Audit, Privacy, and Paying for the SystemPaying for the System

ModelsModels

• Certified Service Provider (CSP)Certified Service Provider (CSP)

• Retailer Using Certified Automated Retailer Using Certified Automated System (CAS)System (CAS)

• Proprietary System as a Certified Proprietary System as a Certified Automated System (CAS)Automated System (CAS)

• Traditional collection systemsTraditional collection systems

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Certified Service Provider Certified Service Provider

Retailer selects CSP to perform sales tax functions.Retailer selects CSP to perform sales tax functions. CSP determines tax due, pays the tax to the states, CSP determines tax due, pays the tax to the states,

and files the return with the states using a CAS.and files the return with the states using a CAS. States will compensate a CSP.States will compensate a CSP. CSP is liable for tax collected and tax due on CSP is liable for tax collected and tax due on

transactions using certified software.transactions using certified software. CSP is not liable for tax due as a result of errors by CSP is not liable for tax due as a result of errors by

the state and fraud by the retailer.the state and fraud by the retailer. CSP is subject to audit and periodic system CSP is subject to audit and periodic system

checks.checks.

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Retailer Uses Retailer Uses Certified Automated System Certified Automated System

Retailer selects CAS to calculate tax due. Retailer selects CAS to calculate tax due. Person who obtained CAS state certification is Person who obtained CAS state certification is

liable for failure of system to perform as liable for failure of system to perform as certified and failure to timely correct errors.certified and failure to timely correct errors.

Retailer is liable for tax collected and tax due Retailer is liable for tax collected and tax due on transactions using CAS.on transactions using CAS.

Retailer is subject to audit on tax remittance Retailer is subject to audit on tax remittance and return filing. and return filing.

CAS is subject to periodic system checks.CAS is subject to periodic system checks.

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Proprietary System as a Proprietary System as a Certified Automated SystemCertified Automated System

Retailer obtains certification of sales tax system Retailer obtains certification of sales tax system from states.from states.

Retailer is liable for tax collected and tax due on Retailer is liable for tax collected and tax due on transactions using system.transactions using system.

Retailer is subject to periodic system checks.Retailer is subject to periodic system checks. Retailer is subject to audit on tax remittance and Retailer is subject to audit on tax remittance and

return filing.return filing.

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Traditional Collection SystemsTraditional Collection Systems

Current practiceCurrent practice Uniform laws will apply (existing Uniform laws will apply (existing

taxpayers get benefits)taxpayers get benefits)

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Tax Base Uniformity and Tax Base Uniformity and Exemption AdministrationExemption Administration

Exemption ProcessingExemption Processing

• Relax good faith requirementRelax good faith requirement

• Exemption databaseExemption database Product codes/classifications Product codes/classifications

• Exploring coding systemsExploring coding systems DefinitionsDefinitions

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Tax Rates, Registration, Returns Tax Rates, Registration, Returns and Remittancesand Remittances

Rate issuesRate issues Matching rates to jurisdictionMatching rates to jurisdiction Notice of tax rate changesNotice of tax rate changes Single registrationSingle registration Simplified filingSimplified filing

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Sourcing and Other Sourcing and Other SimplificationsSimplifications

Uniform treatment of bad debtsUniform treatment of bad debts Uniform roundingUniform rounding Uniform sourcingUniform sourcing

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The ProjectThe Project AccomplishmentsAccomplishments

• Reviewed Features and IssuesReviewed Features and Issues

• Met with Software ProvidersMet with Software Providers

• Met with RetailersMet with Retailers

• Recruited Resource PeopleRecruited Resource People

• Increased State ParticipationIncreased State Participation

• Issued RFP for Pilot ProgramIssued RFP for Pilot Program

• Awarded Contracts for Pilot ProgramAwarded Contracts for Pilot Program

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Pilot ProjectPilot Project Purpose - Test LinkagePurpose - Test Linkage Features - Existing Tax Law and Some Uniformity Features - Existing Tax Law and Some Uniformity

FeaturesFeatures States: States: Kansas North CarolinaKansas North Carolina

Michigan WisconsinMichigan Wisconsin Projected Date - October 1, 2000Projected Date - October 1, 2000 Certified Service ProvidersCertified Service Providers

• esalestax.comesalestax.com• Pitney Bowes (Vertex)Pitney Bowes (Vertex)• Taxware International (Hewlett-Packard)Taxware International (Hewlett-Packard)• Taxware International (Pitney Bowes)Taxware International (Pitney Bowes)

Streamlined Sales Tax SystemStreamlined Sales Tax System

Uniform Features• Rate Simplifications• Initial Uniform Definitions• Exemption Administration• Uniform Sourcing Rule• Uniform Bad Debts Treatment • Uniform Rounding Rule• Certification Authority• Payment Provisions

Model Legislation

• More Uniform Definitions• Product Coding• Uniform Return• Review of Pilot Results

Jan 2001

Additional Development (Phase II)

Streamlined Sales Tax SystemStreamlined Sales Tax System

Pilot Project• RFP’s Issued• Proposals Received• Proposals Due• Contracts Awarded (Aug 2000)• Pilot Begins (Oct 2000)

Oct 2000Aug 2000

Streamlined Sales Tax SystemStreamlined Sales Tax System

(Uniform Features and Procedures)

Pilot Project

Model Legislation

Legislative Adoption of Model

Legislation (Phase I)Project (Phase II)

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Project TimelineProject Timeline

Sept 13-15 Project MeetingSept 13-15 Project Meeting

Sept 19Sept 19 Draft Work Products Posted to Draft Work Products Posted to

WebsiteWebsite

Sept 29Sept 29 Public Comment DayPublic Comment Day

OctoberOctober Project MeetingProject Meeting

OctoberOctober Drafting of Model LegislationDrafting of Model Legislation

December Approval of Model LegislationDecember Approval of Model Legislation

20012001 Legislative Adoption of Model Legislative Adoption of Model

LegislationLegislation

20012001 Additional DevelopmentAdditional Development

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WebsiteWebsite www.streamlinedsalestax.orgwww.streamlinedsalestax.org

• Structure and RulesStructure and Rules

• Participating StatesParticipating States

• Meeting AnnouncementsMeeting Announcements

• AgendasAgendas

• Press ReleasesPress Releases

• Project UpdatesProject Updates