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S1193......................................................by STATE AFFAIRS
TAX - SALES/USE - Adds to existing law to authorize the Simplified Sales
and Use Tax Administration Act; to provide for participation in multistate
discussions to review or amend the terms of the Streamlined Sales and Use
Tax Agreement; and to provide terms and conditions of the agreement.
04/24 Senate intro - 1st rdg - to printing
04/25 Rpt prt - to Loc Gov
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-seventh Legislature First Regular Session - 2003
IN THE SENATE
SENATE BILL NO. 1193
BY STATE AFFAIRS COMMITTEE
1 AN ACT
2 RELATING TO SALES AND USE TAXES; AMENDING TITLE 63, IDAHO CODE, BY THE ADDI-
3 TION OF A NEW CHAPTER 43, TITLE 63, IDAHO CODE, TO AUTHORIZE THE SIMPLI-
4 FIED SALES AND USE TAX ADMINISTRATION ACT, TO PROVIDE A SHORT TITLE, TO
5 PROVIDE DEFINITIONS, TO PROVIDE A STATEMENT OF FINDINGS AND INTENT, TO SET
6 OUT DUTIES OF THE STATE TAX COMMISSION, TO AUTHORIZE THE COMMISSION TO
7 ENTER THE STREAMLINED SALES TAX AGREEMENT, TO PROVIDE THAT THE AGREEMENT
8 DOES NOT PREEMPT STATE LAW, TO ESTABLISH THE MINIMUM TERMS AND CONDITIONS
9 FOR ENTERING THE AGREEMENT, TO PROVIDE THAT THE AGREEMENT IS AN ACCORD
10 AMONG COOPERATING SOVEREIGNS, TO LIMIT THE RIGHT TO ACTION UNDER THE
11 AGREEMENT, TO PROVIDE FOR CERTIFIED SERVICE PROVIDERS, TO REQUIRE THE
12 STATE TAX COMMISSION TO PREPARE PROPOSED LEGISLATION TO IMPLEMENT THE PRO-
13 VISIONS OF THE STREAMLINED SALES TAX AGREEMENT; PROVIDING AN EFFECTIVE
14 DATE AND A CONTINGENT EFFECTIVE DATE.
15 Be It Enacted By the Legislature of the State of Idaho:
16 SECTION 1. That Title 63, Idaho Code, be, and the same is hereby amended
17 by the addition thereto of a NEW CHAPTER to be known and designated as Chapter
18 43, Title 63, Idaho Code, and to read as follows:
19 CHAPTER 43
20 SIMPLIFIED SALES AND USE TAX ADMINISTRATION ACT
21 63-4301. SHORT TITLE. This chapter shall be known and cited as the
22 "Simplified Sales and Use Tax Administration Act."
23 63-4302. DEFINITIONS. The definitions in this section apply throughout
24 this chapter unless the context clearly requires otherwise.
25 (1) "Agreement" means the streamlined sales and use tax agreement as
26 adopted.
27 (2) "Certified automated system" means software certified jointly by the
28 states that are signatories to the agreement to calculate the tax imposed by
29 each jurisdiction on a transaction, determine the amount of tax to remit to
30 the appropriate state, and maintain a record of the transaction.
31 (3) "Certified service provider" means an agent certified jointly by the
32 states that are signatories to the agreement to perform all of the seller's
33 sales tax functions.
34 (4) "Commission" means the Idaho state tax commission.
35 (5) "Person" means an individual, trust, estate, fiduciary, partnership,
36 limited liability company, limited liability partnership, corporation, or any
37 other legal entity.
38 (6) "Sales tax" means the tax levied by section 63-3619, Idaho Code.
39 (7) "Seller" means any person making sales, leases, or rentals of per-
40 sonal property or services.
41 (8) "State" means any state of the United States and the District of
2
1 Columbia.
2 (9) "Use tax" means the tax levied by section 63-3621, Idaho Code.
3 63-4303. STATEMENT OF FINDINGS AND INTENT. The legislature finds that a
4 simplified sales and use tax system will reduce and, over time, eliminate the
5 burden and cost for all vendors to collect this state's sales and use tax. The
6 legislature further finds that this state should participate in multistate
7 discussions to review or amend the terms of the agreement to simplify and mod-
8 ernize sales and use tax administration in order to substantially reduce the
9 burden of tax compliance for all sellers and for all types of commerce.
10 63-4304. DUTIES OF THE COMMISSION. (1) For the purposes of reviewing or
11 amending the agreement embodying the simplification requirements in section
12 63-4307, Idaho Code, the state shall enter into multistate discussions. For
13 purposes of these discussions, the commission shall represent the state. The
14 governor may appoint up to four (4) persons to consult with the commission at
15 these discussions. The persons advising the commission shall not be compen-
16 sated and are not entitled to payment of travel expenses by the state.
17 (2) The commission shall regularly consult with an advisory group com-
18 posed of two (2) members from the senate, appointed by the president pro tem-
19 pore and two (2) members of the house of representatives appointed by the
20 speaker of the house; representatives of retailers, including those selling
21 via mail, telephone and the internet; representatives of large and small busi-
22 nesses; and representatives of counties and cities. The commission shall use
23 its best efforts to consult with the advisory group before any multistate dis-
24 cussions in which it is anticipated that amendments may be proposed to the
25 agreement embodying the simplification requirements in section 63-4307, Idaho
26 Code.
27 63-4305. AUTHORIZATION FOR AGREEMENT. The commission shall enter into the
28 streamlined sales and use tax agreement and the streamlined sales tax project
29 with one (1) or more states to simplify and modernize sales and use tax admin-
30 istration in order to substantially reduce the burden of tax compliance for
31 all sellers and for all types of commerce. In furtherance of the agreement,
32 the state may act jointly with other states that are members of the agreement
33 to establish standards for certification of a certified service provider and
34 certified automated system and establish performance standards for multistate
35 sellers. The state is further authorized to take other actions reasonably
36 required to implement this chapter. Other actions authorized by this section
37 include, but are not limited to, the adoption of rules and the joint procure-
38 ment, with other member states, of goods and services in furtherance of the
39 cooperative agreement. The commission, or the commission's designee, may rep-
40 resent this state before the other states that are signatories to the agree-
41 ment.
42 63-4306. AGREEMENT NOT TO PREEMPT STATE LAW. No provision of the agree-
43 ment authorized by this chapter in whole or part invalidates or amends any
44 provision of the law of this state. Adoption of the agreement by this state
45 does not amend or modify any law of this state. Implementation of any condi-
46 tion of the agreement in this state, whether adopted before, at, or after mem-
47 bership of this state in the agreement, must be by the action of the legisla-
48 ture or by administrative rules of the commission authorized by the legisla-
49 ture.
50 63-4307. TERMS AND CONDITIONS OF AGREEMENT. The commission shall not
3
1 enter into the streamlined sales and use tax agreement unless the agreement
2 requires each state to abide by the requirements in this section.
3 (1) The agreement must set restrictions to limit, over time, the number
4 of state rates.
5 (2) The agreement must establish uniform standards for:
6 (a) The sourcing of transactions to taxing jurisdictions;
7 (b) The administration of exempt sales; and
8 (c) Sales and use tax returns and remittances.
9 (3) The agreement must provide a central, electronic registration system
10 that allows a seller to register to collect and remit sales and use taxes for
11 all signatory states.
12 (4) The agreement must provide that registration with the central regis-
13 tration system and the collection of sales and use taxes in the signatory
14 states will not be used as a factor in determining whether the seller has
15 nexus with a state for any tax.
16 (5) The agreement must provide for reduction of the burdens of complying
17 with local sales and use taxes by:
18 (a) Restricting variances between the state and local tax bases;
19 (b) Requiring states to administer any sales and use taxes levied by
20 local jurisdictions within the state so that sellers collecting and remit-
21 ting these taxes will not have to register or file returns with, remit
22 funds to, or be subject to independent audits from local taxing jurisdic-
23 tions;
24 (c) Restricting the frequency of changes in the local sales and use tax
25 rates and setting effective dates for the application of local jurisdic-
26 tional boundary changes to local sales and use taxes; and
27 (d) Providing notice of changes in local sales and use tax rates and of
28 changes in the boundaries of local taxing jurisdictions.
29 (6) The agreement must outline any monetary allowances that are to be
30 provided by the states to sellers or certified service providers. The agree-
31 ment must allow for a joint public and private sector study of the compliance
32 cost on sellers and certified service providers to collect sales and use taxes
33 for state and local governments under various levels of complexity to be com-
34 pleted by July 1, 2003.
35 (7) The agreement must require each state to certify compliance with the
36 terms of the agreement before joining and to maintain compliance, under the
37 laws of the member state, with all provisions of the agreement while a member.
38 (8) The agreement must require each state to adopt a uniform policy for
39 certified service providers that protects the privacy of consumers and main-
40 tains the confidentiality of tax information.
41 (9) The agreement must provide for the appointment of an advisory council
42 of private sector representatives and an advisory council of nonmember state
43 representatives to consult with in the administration of the agreement.
44 63-4308. ACCORD AMONG COOPERATING SOVEREIGNS. The agreement authorized by
45 this chapter is an accord among individual cooperating sovereigns in further-
46 ance of their governmental functions. The agreement provides a mechanism among
47 the member states to establish and maintain a cooperative, simplified system
48 for the application and administration of sales and use taxes under the duly
49 adopted law of each member state.
50 63-4309. LIMITATIONS ON ACTIONS. (1) The agreement authorized by this
51 chapter binds and inures only to the benefit of this state and the other mem-
52 ber states. No person, other than a member state, is an intended beneficiary
53 of the agreement. Any benefit to a person other than a state is established by
4
1 the law of this state and the other member states and not by the terms of the
2 agreement.
3 (2) Consistent with subsection (1) of this section, no person has any
4 cause of action or defense under the agreement or by virtue of this state's
5 approval of the agreement. No person may challenge, in any action brought
6 under any provision of law, any action or inaction by any state, agency, other
7 instrumentality of this state, or any political subdivision of this state on
8 the ground that the action or inaction is inconsistent with the agreement.
9 (3) No law of this state, nor the application thereof, may be declared
10 invalid as to any person or circumstance on the ground that the provision or
11 application is inconsistent with the agreement.
12 63-4310. CERTIFIED SERVICE PROVIDER. (1) A certified service provider is
13 the agent of a seller, with whom the certified service provider has con-
14 tracted, for the collection and remittance of sales and use taxes. As the
15 seller's agent, the certified service provider is liable for sales and use tax
16 due each member state on all sales transactions it processes for the seller
17 except as set out in this section. A seller that contracts with a certified
18 service provider is not liable to the state for sales or use tax due on trans-
19 actions processed by the certified service provider unless the seller misrep-
20 resented the type of items it sells or committed fraud. In the absence of
21 probable cause to believe that the seller has committed fraud or made a mate-
22 rial misrepresentation, the seller is not subject to audit on the transactions
23 processed by the certified service provider. A seller is subject to audit for
24 transactions not processed by the certified service provider. The member
25 states acting jointly may perform a system check of the seller and review the
26 seller's procedures to determine if the certified service provider's system is
27 functioning properly and the extent to which the seller's transactions are
28 being processed by the certified service provider.
29 (2) A person that provides a certified automated system is responsible
30 for the proper functioning of that system and is liable to the state for
31 underpayments of tax attributable to errors in the functioning of the certi-
32 fied automated system. A seller that uses a certified automated system remains
33 responsible and is liable to the state for reporting and remitting tax.
34 (3) A seller that has a proprietary system for determining the amount of
35 tax due on transactions and has signed an agreement establishing a performance
36 standard for that system is liable for the failure of the system to meet the
37 performance standard.
38 63-4311. NECESSARY REMEDIAL LEGISLATION. Upon becoming a member of the
39 streamlined sales and use tax agreement, the commission shall prepare legisla-
40 tion conforming state law as necessary and shall provide such legislation to
41 the governor and to the senate local government and taxation committee and the
42 house of representatives revenue and taxation committee.
43 SECTION 2. Sections 63-4301 through 63-4309, Idaho Code, shall be in full
44 force and effect on and after July 1, 2003; Sections 63-4310 and 63-4311,
45 Idaho Code, shall be in full force and effect when Idaho becomes a member of
46 the Streamlined Sales and Use Tax Agreement but in no event prior to July 1,
47 2003.
STATEMENT OF PURPOSE
RS 13307
Passage of this legislation allows Idaho to fully participate with thirty-five (35) states in
the Streamlined Sales Tax Implementing States (SSTIS.) Idaho will send three delegates to the
SSTIS. They will have the power to vote for Idaho with each of the other participating states
in amending the model Streamlined Sales and Use Tax Agreement (SSUTA)as ratified by the
participating states on November 12, 2002 until the Agreement becomes effective when 10 states
representing 20 percent of the sales tax population has complied with the Agreement. For
Idaho to comply with the Agreement, the Legislature will need to consider additional
legislation making appropriate changes to Idaho's sales and use tax statutes. (Idaho's
existing sales and use tax law already largely conforms with the Agreement.)
After ten states representing 20 percent of the sales tax population has complied with the
Agreement, the Agreement is effective and those ten states form the Governing Board of the
Streamlined Sales and Use Tax Agreement. Participation by out of state sellers is voluntary
until the U.S. Congress grants to those states that have complied with the Agreement, the
authority to require all sellers to collect those states' sales and use taxes.
There are more than 7,500 sales taxing jurisdictions in 45 states and the District of Columbia
with sales tax. For these states, sales tax is a substantial part of their revenue mix. The
Internet, and the resulting expanded retail commerce that it fosters, has created competitive
price advantages that are rapidly moving sales away from Main Street retail businesses. These
businesses pay state and local taxes, and are required to collect and remit state sales taxes.
Remote sellers avoid these taxes except in those states where they have a physical presence or
nexus.
Losses of state sales taxes are massive. In Idaho, lost sales tax is estimated, in a national
study to exceed $44 million or 5% total 2001 sales taxes and is expected to grow to $151
million or approximately 14% in 2006.
FISCAL IMPACT
The only fiscal impact would be for delegate travel.
Contact:
Senator John Andreason (332-1326)
Senator Hal Bunderson (332-1330)
Ted Spangler, Idaho State Tax Commission (334-7530)
STATEMENT OF PURPOSE/FISCAL NOTE S 1193