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S1437......................................................by STATE AFFAIRS
STREAMLINED SALES TAX SYSTEM - Adds to existing law to authorize the State
Tax Commission to enter into multistate discussions to implement the
streamlined sales tax.
03/04 Senate intro - 1st rdg - to printing
03/05 Rpt prt - to St Aff
03/09 Rpt out - rec d/p - to 2nd rdg
03/10 2nd rdg - to 3rd rdg
03/11 3rd rdg - PASSED - 34-0-1
AYES -- Andreason(Andreason), Bailey, Brandt, Bunderson, Burkett,
Burtenshaw, Calabretta, Cameron, Compton, Darrington, Davis, Gannon,
Geddes, Goedde, Hill, Ingram, Kennedy, Keough, Little, Lodge,
Malepeai, Marley, McKenzie, McWilliams, Noble, Noh, Pearce,
Richardson, Schroeder, Sorensen, Stegner, Stennett, Sweet, Werk
NAYS -- None
Absent and excused -- Williams
Floor Sponsors - Bunderson & Andreason(Andreason)
Title apvd - to House
03/11 House intro - 1st rdg - to Rev/Tax
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-seventh Legislature Second Regular Session - 2004
IN THE SENATE
SENATE BILL NO. 1437
BY STATE AFFAIRS COMMITTEE
1 AN ACT
2 RELATING TO THE STREAMLINED SALES TAX SYSTEM; PROVIDING LEGISLATIVE INTENT;
3 AMENDING CHAPTER 36, TITLE 63, IDAHO CODE, BY THE ADDITION OF NEW SECTIONS
4 63-3641, 63-3642, 63-3643, 63-3644, 63-3645, 63-3646, 63-3647, 63-3648 AND
5 63-3649, IDAHO CODE, TO PROVIDE DEFINITIONS, TO AUTHORIZE THE STATE TAX
6 COMMISSION TO PARTICIPATE IN MULTISTATE DISCUSSIONS, TO ESTABLISH AN ADVI-
7 SORY GROUP, TO AUTHORIZE THE STATE TAX COMMISSION TO REPRESENT AND VOTE
8 FOR THIS STATE IN REGARD TO THE STREAMLINED SALES TAX AGREEMENT, TO GRANT
9 THE STATE TAX COMMISSION AUTHORITY TO ENTER INTO THE AGREEMENT, TO ESTAB-
10 LISH THE RELATIONSHIP OF THE AGREEMENT TO STATE LAW, TO DESCRIBE THE MINI-
11 MUM TERMS OF THE AGREEMENT, TO DESCRIBE THE RELATIONSHIP AMONG THE COOPER-
12 ATING SOVEREIGNS IN THE AGREEMENT, TO DESCRIBE THE LIMITED EFFECT OF THE
13 AGREEMENT, TO LIMIT CAUSES OF ACTION BASED ON THE AGREEMENT, TO PROVIDE
14 THAT THE AGREEMENT MAY NOT SUPERSEDE ANY PROVISION OF STATE LAW, TO AUTHO-
15 RIZE AND DESCRIBE CONTRACTS WITH CERTIFIED SERVICE PROVIDERS AND TO
16 REQUIRE THE STATE TAX COMMISSION TO PREPARE AND REPORT TO THE LEGISLATURE
17 PROPOSED LEGISLATION TO CONFORM STATE LAW TO THE AGREEMENT.
18 Be It Enacted by the Legislature of the State of Idaho:
19 SECTION 1. LEGISLATIVE INTENT. The Legislature of the State of Idaho
20 finds that this state should enter into an agreement with one or more states
21 to simplify and modernize sales and use tax administration in order to sub-
22 stantially reduce the burden of tax compliance for all sellers and for all
23 types of commerce.
24 SECTION 2. That Chapter 36, Title 63, Idaho Code, be, and the same is
25 hereby amended by the addition thereto of NEW SECTIONS, to be known and desig-
26 nated as Sections 63-3641, 63-3642, 63-3643, 63-3644, 63-3645, 63-3646,
27 63-3647, 63-3648 and 63-3649, Idaho Code, and to read as follows:
28 63-3641. DEFINITIONS. As used in sections 63-3641 through 63-3649, Idaho
29 Code:
30 (1) "Agreement" means the streamlined sales and use tax agreement.
31 (2) "Certified automated system" means software certified jointly by the
32 states that are signatories to the agreement to calculate the tax imposed by
33 each jurisdiction on a transaction, determine the amount of tax to remit to
34 the appropriate state, and maintain a record of the transaction.
35 (3) "Certified service provider" means an agent certified jointly by the
36 states that are signatories to the agreement to perform all of the seller's
37 sales tax functions.
38 (4) "Person" means an individual, trust, estate, fiduciary, partnership,
39 limited liability company, limited liability partnership, corporation, or any
40 other legal entity.
41 (5) "Sales tax" means the tax levied under section 63-3619, Idaho Code.
42 (6) "Seller" means any person making sales, leases or rentals of personal
2
1 property or services.
2 (7) "Signatory state" means a state that has entered into the agreement.
3 (8) "Sourcing" means determining the tax situs of a transaction.
4 (9) "State" means any state of the United States and the District of
5 Columbia.
6 (10) "Use tax" means the tax levied under section 63-3621, Idaho Code.
7 63-3642. AUTHORITY TO PARTICIPATE IN MULTISTATE NEGOTIATIONS. (1) For the
8 purposes of reviewing or amending the agreement embodying the simplification
9 requirements in section 63-3645, Idaho Code, the state may enter into multi-
10 state discussions. For purposes of these discussions, the state tax commission
11 shall represent this state. The state tax commission shall regularly consult
12 with an advisory group consisting of three (3) members, one (1) each appointed
13 by the governor, the president pro tempore of the senate and the speaker of
14 the house of representatives regarding these discussions.
15 (2) The state tax commission may represent this state in all meetings,
16 limited only to those states that are so authorized by statute to enter into
17 the agreement. The state tax commission shall vote on behalf of this state
18 and shall represent the position of this state in all matters relating to the
19 adoption of or amendments to the agreement.
20 63-3643. AUTHORITY TO ENTER AGREEMENT. The state tax commission is autho-
21 rized to enter into the streamlined sales and use tax agreement with one (1)
22 or more states to simplify and modernize sales and use tax administration in
23 order to substantially reduce the burden of tax compliance for all sellers and
24 for all types of commerce. In furtherance of the agreement, the state tax com-
25 mission is authorized to act jointly with other states that are members of the
26 agreement to establish standards for certification of a certified service pro-
27 vider and certified automated system and establish performance standards for
28 multistate sellers. The state tax commission is further authorized to take
29 other actions reasonably required to implement the provisions set forth in
30 this act. Other actions authorized by this section include, but are not lim-
31 ited to, the adoption of rules and regulations and the joint procurement, with
32 other member states, of goods and services in furtherance of the cooperative
33 agreement. The state tax commission or the commission's designee is autho-
34 rized to represent this state before the other states that are signatories to
35 the agreement.
36 63-3644. RELATIONSHIP TO STATE LAW. No provision of the agreement autho-
37 rized by this act in whole or part invalidates or amends any provision of the
38 law of this state. Adoption of the agreement by the state of Idaho does not
39 amend or modify any law of the state of Idaho. Implementation of any condition
40 of the agreement in this state, whether adopted before, at, or after member-
41 ship of this state in the agreement, must be by the action of this state.
42 63-3645. AGREEMENT REQUIREMENTS. The state tax commission shall not enter
43 into the streamlined sales and use tax agreement unless the agreement requires
44 each state to abide by the following requirements:
45 (1) Uniform State Rate. The agreement must set restrictions to achieve,
46 over time, more uniform state rates through the following:
47 (a) Limiting the number of state rates;
48 (b) Limiting the application of maximums on the amount of state tax that
49 is due on a transaction;
50 (c) Limiting the application of thresholds on the application of state
51 tax.
3
1 (2) Uniform Standards. The agreement must establish uniform standards for
2 the following:
3 (a) The sourcing of transactions to taxing jurisdictions;
4 (b) The administration of exempt sales;
5 (c) The allowances a seller can take for bad debts;
6 (d) Sales and use tax returns and remittances.
7 (3) Uniform Definitions. The agreement must require states to develop and
8 adopt uniform definitions of sales and use tax terms. The definitions must
9 enable a state to preserve its ability to make policy choices not inconsistent
10 with the uniform definitions.
11 (4) Central Registration. The agreement must provide a central, elec-
12 tronic registration system that allows a seller to register to collect and
13 remit sales and use taxes for all signatory states.
14 (5) No Nexus Attribution. The agreement must provide that registration
15 with the central registration system and the collection of sales and use taxes
16 in the signatory states will not be used as a factor in determining whether
17 the seller has nexus with a state for any tax.
18 (6) Local Sales and Use Taxes. The agreement must provide for reduction
19 of the burdens of complying with local sales and use taxes through the follow-
20 ing:
21 (a) Restricting variances between the state and local tax bases;
22 (b) Requiring states to administer any sales and use taxes levied by
23 local jurisdictions within the state so that sellers collecting and remit-
24 ting these taxes will not have to register or file returns with, remit
25 funds to, or be subject to independent audits from local taxing jurisdic-
26 tions;
27 (c) Restricting the frequency of changes in the local sales and use tax
28 rates and setting effective dates for the application of local jurisdic-
29 tional boundary changes to local sales and use taxes;
30 (d) Providing notice of changes in local sales and use tax rates and of
31 changes in the boundaries of local taxing jurisdictions.
32 (7) Monetary Allowances. The agreement must outline any monetary allow-
33 ances that are to be provided by the states to sellers or certified service
34 providers.
35 (8) State Compliance. The agreement must require each state to certify
36 compliance with the terms of the agreement prior to joining and to maintain
37 compliance, under the laws of the member state, with all provisions of the
38 agreement while a member.
39 (9) Consumer Privacy. The agreement must require each state to adopt a
40 uniform policy for certified service providers that protects the privacy of
41 consumers and maintains the confidentiality of tax information.
42 (10) Advisory Councils. The agreement must provide for the appointment of
43 an advisory council of private sector representatives and an advisory council
44 of nonmember state representatives to consult with in the administration of
45 the agreement.
46 63-3646. COOPERATING SOVEREIGNS. The agreement authorized by this act is
47 an accord among individual cooperating sovereigns in furtherance of their gov-
48 ernmental functions. The agreement provides a mechanism among the member
49 states to establish and maintain a cooperative, simplified system for the
50 application and administration of sales and use taxes under the duly adopted
51 law of each member state.
52 63-3647. LIMITED BINDING AND BENEFICIAL EFFECT. (1) The agreement autho-
53 rized by this act binds and inures only to the benefit of this state and the
4
1 other member states. No person, other than a member state, is an intended ben-
2 eficiary of the agreement. Any benefit to a person other than a state is
3 established by the law of this state and the other member states and not by
4 the terms of the agreement.
5 (2) Consistent with subsection (1) of this section, no person shall have
6 any cause of action or defense under the agreement or by virtue of this
7 state's approval of the agreement. No person may challenge, in any action
8 brought under any provision of law, any action or inaction by any department,
9 agency, or other instrumentality of this state, or any political subdivision
10 of this state on the ground that the action or inaction is inconsistent with
11 the agreement.
12 (3) No law of this state, or the application thereof, may be declared
13 invalid as to any person or circumstance on the ground that the provision or
14 application is inconsistent with the agreement.
15 63-3648. SELLER AND THIRD PARTY LIABILITY. (1) A certified service pro-
16 vider is the agent of a seller, with whom the certified service provider has
17 contracted, for the collection and remittance of sales and use taxes. As the
18 seller's agent, the certified service provider is liable for sales and use tax
19 due each member state on all sales transactions it processes for the seller
20 except as set out in this section.
21 A seller that contracts with a certified service provider is not liable to
22 the state for sales or use tax due on transactions processed by the certified
23 service provider unless the seller misrepresented the type of items it sells
24 or committed fraud. In the absence of probable cause to believe that the
25 seller has committed fraud or made a material misrepresentation, the seller is
26 not subject to audit on the transactions processed by the certified service
27 provider. A seller is subject to audit for transactions not processed by the
28 certified service provider. The member states acting jointly may perform a
29 system check of the seller and review the seller's procedures to determine if
30 the certified service provider's system is functioning properly and the extent
31 to which the seller's transactions are being processed by the certified ser-
32 vice provider.
33 (2) A person that provides a certified automated system is responsible
34 for the proper functioning of that system and is liable to the state for
35 underpayments of tax attributable to errors in the functioning of the certi-
36 fied automated system. A seller that uses a certified automated system remains
37 responsible and is liable to the state for reporting and remitting tax.
38 (3) A seller that has a proprietary system for determining the amount of
39 tax due on transactions and has signed an agreement establishing a performance
40 standard for that system is liable for the failure of the system to meet the
41 performance standard.
42 63-3649. LEGISLATION. Upon becoming a member of the streamlined sales and
43 use tax agreement, the state tax commission shall prepare legislation conform-
44 ing state law as necessary and shall provide such legislation to the legisla-
45 ture before the appropriate deadline for introducing legislation in any regu-
46 lar session.
STATEMENT OF PURPOSE
RS 14191
This legislation allows Idaho to work with 44 other states and
the District of Columbia in solving two major problems resulting
from the explosive nationwide growth in Internet sales.
Problems:
1. Remote sellers of retail goods who do not have nexus or
presence in the state in which they sell can and generally do
avoid collecting sales taxes on sales into that state. This gives
them significant unfair competitive price advantage over
taxpaying retail businesses.
2. This tax avoidance is significantly eroding the sales tax
revenue streams of the states.
In Idaho, such sales in 2001 is estimated to have resulted in
lost business to Idaho retailers of $880 million and sales tax
avoidance of $44 million or 5% of total sales tax receipts. In
2006 it is expected to grow to over $3 billion in retail sales
lost to Idaho's taxpaying businesses and a loss of sales tax
revenue due to tax avoidance of $151 million or 14% of the total
estimated sales tax collections.
Passage of this legislation allows Idaho to fully participate
with the Streamlined Sales Tax Implementing States (SSTIS). Idaho
will send a delegate to the SSTIS. The delegate 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. The Agreement becomes effective when 10 states
representing 20 percent of the sales tax population have complied
with the Agreement and the U.S. Congress passes enabling
legislation (in process).
Before Idaho can sign the Agreement, the Idaho legislature will
need to pass additional legislation conforming Idaho's sales and
use tax statutes to the agreement. (Any changes will be minor.
Idaho's existing sales and use tax law already largely conforms
with the Agreement).
FISCAL IMPACT
This legislation does not increase or decrease taxes. Rather, it
allows Idaho to participate in solving this serious public policy
question. The only fiscal impact would be for delegate travel.
Contact
Name: Representative Mark Snodgrass - 332-1261
Senator John Andreason and Senator Hal Bunderson
Phone: 332-1330
STATEMENT OF PURPOSE/FISCAL NOTE S 1437
REVISED REVISED REVISED REVISE