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S1201......................................................by STATE AFFAIRS SALES AND USE TAX - Adds to existing law to authorize the Simplified Sales and Use Tax Administration Act upon certain conditions. 03/15 Senate intro - 1st rdg - to printing 03/16 Rpt prt - to St Aff 03/24 Rpt out - rec d/p - to 2nd rdg 03/25 2nd rdg - to 3rd rdg Rls susp - PASSED - 32-2-0, 1 vacancy AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett, Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis, Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough, Langhorst, Little, Lodge, Malepeai, Marley, McGee, McKenzie, Pearce, Richardson, Stegner, Stennett, Werk, Williams NAYS -- Schroeder, Sweet Absent and excused -- (District 21 seat vacant) Floor Sponsor - Bunderson Title apvd - to House 03/28 House intro - 1st rdg - to Rev/Tax
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-eighth Legislature First Regular Session - 2005 IN THE SENATE SENATE BILL NO. 1201 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 46, TITLE 63, IDAHO CODE, TO PROVIDE A SHORT TITLE, 4 TO PROVIDE DEFINITIONS, TO PROVIDE A STATEMENT OF FINDINGS AND INTENT, TO 5 PROVIDE DUTIES OF THE STATE TAX COMMISSION, TO AUTHORIZE THE COMMISSION TO 6 ENTER THE STREAMLINED SALES TAX AGREEMENT, TO PROVIDE THAT THE AGREEMENT 7 DOES NOT PREEMPT STATE LAW, TO ESTABLISH THE MINIMUM TERMS AND CONDITIONS 8 FOR ENTERING THE AGREEMENT, TO PROVIDE THAT THE AGREEMENT IS AN ACCORD 9 AMONG COOPERATING SOVEREIGNS, TO PROVIDE FOR LIMITATIONS ON ACTIONS, TO 10 PROVIDE FOR CERTIFIED SERVICE PROVIDERS AND TO REQUIRE THE STATE TAX COM- 11 MISSION TO PREPARE PROPOSED LEGISLATION TO IMPLEMENT THE PROVISIONS OF THE 12 SIMPLIFIED SALES AND USE TAX AGREEMENT; PROVIDING AN EFFECTIVE DATE AND 13 PROVIDING A CONTINGENT EFFECTIVE DATE. 14 Be It Enacted by the Legislature of the State of Idaho: 15 SECTION 1. That Title 63, Idaho Code, be, and the same is hereby amended 16 by the addition thereto of a NEW CHAPTER, to be known and designated as Chap- 17 ter 46, Title 63, Idaho Code, and to read as follows: 18 CHAPTER 46 19 SIMPLIFIED SALES AND USE TAX ADMINISTRATION ACT 20 63-4601. SHORT TITLE. This chapter shall be known and cited as the 21 "Simplified Sales and Use Tax Administration Act." 22 63-4602. DEFINITIONS. The definitions in this section apply throughout 23 this chapter unless the context clearly requires otherwise. 24 (1) "Agreement" means the streamlined sales and use tax agreement as 25 adopted. 26 (2) "Certified automated system" means software certified jointly by the 27 states that are signatories to the agreement to calculate the tax imposed by 28 each jurisdiction on a transaction, determine the amount of tax to remit to 29 the appropriate state, and maintain a record of the transaction. 30 (3) "Certified service provider" means an agent certified jointly by the 31 states that are signatories to the agreement to perform all of the seller's 32 sales tax functions. 33 (4) "Commission" means the Idaho state tax commission. 34 (5) "Person" means an individual, trust, estate, fiduciary, partnership, 35 limited liability company, limited liability partnership, corporation, or any 36 other legal entity. 37 (6) "Sales tax" means the tax levied by section 63-3619, Idaho Code. 38 (7) "Seller" means any person making sales, leases, or rentals of per- 39 sonal property or services. 40 (8) "State" means any state of the United States and the District of 41 Columbia. 2 1 (9) "Use tax" means the tax levied by section 63-3621, Idaho Code. 2 63-4603. STATEMENT OF FINDINGS AND INTENT. The legislature finds that a 3 simplified sales and use tax system will reduce and, over time, eliminate the 4 burden and cost for all vendors to collect this state's sales and use tax. The 5 legislature further finds that this state should participate in multistate 6 discussions to review or amend the terms of the agreement to simplify and mod- 7 ernize sales and use tax administration in order to substantially reduce the 8 burden of tax compliance for all sellers and for all types of commerce. 9 63-4604. DUTIES OF THE COMMISSION. (1) For the purposes of reviewing or 10 amending the agreement embodying the simplification requirements in section 11 63-4607, Idaho Code, the state shall enter into multistate discussions. For 12 purposes of these discussions, the commission shall represent the state. The 13 governor may appoint up to four (4) persons to consult with the commission at 14 these discussions. The persons advising the commission shall not be compen- 15 sated and are not entitled to payment of travel expenses by the state. 16 (2) The commission shall regularly consult with an advisory group com- 17 posed of two (2) members from the senate, appointed by the president pro tem- 18 pore of the senate and two (2) members of the house of representatives 19 appointed by the speaker of the house of representatives; representatives of 20 retailers, including those selling via mail, telephone and the internet; rep- 21 resentatives of large and small businesses; and representatives of counties 22 and cities. The commission shall use its best efforts to consult with the 23 advisory group before any multistate discussions in which it is anticipated 24 that amendments may be proposed to the agreement embodying the simplification 25 requirements in section 63-4607, Idaho Code. 26 63-4605. AUTHORIZATION FOR AGREEMENT. The commission shall enter into the 27 streamlined sales and use tax agreement and the streamlined sales tax project 28 with one (1) or more states to simplify and modernize sales and use tax admin- 29 istration in order to substantially reduce the burden of tax compliance for 30 all sellers and for all types of commerce. In furtherance of the agreement, 31 the state may act jointly with other states that are members of the agreement 32 to establish standards for certification of a certified service provider and 33 certified automated system and establish performance standards for multistate 34 sellers. The state is further authorized to take other actions reasonably 35 required to implement this chapter. Other actions authorized by this section 36 include, but are not limited to, the adoption of rules and the joint procure- 37 ment, with other member states, of goods and services in furtherance of the 38 cooperative agreement. The commission, or the commission's designee, may rep- 39 resent this state before the other states that are signatories to the agree- 40 ment. 41 63-4606. AGREEMENT NOT TO PREEMPT STATE LAW. No provision of the agree- 42 ment authorized by this chapter in whole or in part invalidates or amends any 43 provision of the law of this state. Adoption of the agreement by this state 44 does not amend or modify any law of this state. Implementation of any condi- 45 tion of the agreement in this state, whether adopted before, at, or after mem- 46 bership of this state in the agreement, must be by the action of the legisla- 47 ture or by administrative rules of the commission authorized by the legisla- 48 ture. 49 63-4607. TERMS AND CONDITIONS OF AGREEMENT. The commission shall not 50 enter into the streamlined sales and use tax agreement unless the agreement 3 1 requires each state to abide by the requirements in this section. 2 (1) The agreement must set restrictions to limit, over time, the number 3 of state rates. 4 (2) The agreement must establish uniform standards for: 5 (a) The sourcing of transactions to taxing jurisdictions; 6 (b) The administration of exempt sales; and 7 (c) Sales and use tax returns and remittances. 8 (3) The agreement must provide a central, electronic registration system 9 that allows a seller to register to collect and remit sales and use taxes for 10 all signatory states. 11 (4) The agreement must provide that registration with the central regis- 12 tration system and the collection of sales and use taxes in the signatory 13 states will not be used as a factor in determining whether the seller has 14 nexus with a state for any tax. 15 (5) The agreement must provide for reduction of the burdens of complying 16 with local sales and use taxes by: 17 (a) Restricting variances between the state and local tax bases; 18 (b) Requiring states to administer any sales and use taxes levied by 19 local jurisdictions within the state so that sellers collecting and remit- 20 ting these taxes will not have to register or file returns with, remit 21 funds to, or be subject to independent audits from local taxing jurisdic- 22 tions; 23 (c) Restricting the frequency of changes in the local sales and use tax 24 rates and setting effective dates for the application of local jurisdic- 25 tional boundary changes to local sales and use taxes; and 26 (d) Providing notice of changes in local sales and use tax rates and of 27 changes in the boundaries of local taxing jurisdictions. 28 (6) The agreement must outline any monetary allowances that are to be 29 provided by the states to sellers or certified service providers. The agree- 30 ment must allow for a joint public and private sector study of the compliance 31 cost on sellers and certified service providers to collect sales and use taxes 32 for state and local governments under various levels of complexity to be com- 33 pleted by July 1, 2008. 34 (7) The agreement must require each state to certify compliance with the 35 terms of the agreement before joining and to maintain compliance, under the 36 laws of the member state, with all provisions of the agreement while a member. 37 (8) The agreement must require each state to adopt a uniform policy for 38 certified service providers that protects the privacy of consumers and main- 39 tains the confidentiality of tax information. 40 (9) The agreement must provide for the appointment of an advisory council 41 of private sector representatives and an advisory council of nonmember state 42 representatives to consult with in the administration of the agreement. 43 63-4608. ACCORD AMONG COOPERATING SOVEREIGNS. The agreement authorized by 44 this chapter is an accord among individual cooperating sovereigns in further- 45 ance of their governmental functions. The agreement provides a mechanism among 46 the member states to establish and maintain a cooperative, simplified system 47 for the application and administration of sales and use taxes under the duly 48 adopted law of each member state. 49 63-4609. LIMITATIONS ON ACTIONS. (1) The agreement authorized by this 50 chapter binds and inures only to the benefit of this state and the other mem- 51 ber states. No person, other than a member state, is an intended beneficiary 52 of the agreement. Any benefit to a person other than a state is established 53 by the law of this state and the other member states and not by the terms of 4 1 the agreement. 2 (2) Consistent with subsection (1) of this section, no person has any 3 cause of action or defense under the agreement or by virtue of this state's 4 approval of the agreement. No person may challenge, in any action brought 5 under any provision of law, any action or inaction by any state, agency, other 6 instrumentality of this state, or any political subdivision of this state on 7 the ground that the action or inaction is inconsistent with the agreement. 8 (3) No law of this state, nor the application thereof, may be declared 9 invalid as to any person or circumstance on the ground that the provision or 10 application is inconsistent with the agreement. 11 63-4610. CERTIFIED SERVICE PROVIDER. (1) A certified service provider is 12 the agent of a seller, with whom the certified service provider has con- 13 tracted, for the collection and remittance of sales and use taxes. As the 14 seller's agent, the certified service provider is liable for sales and use tax 15 due each member state on all sales transactions it processes for the seller 16 except as set out in this section. A seller that contracts with a certified 17 service provider is not liable to the state for sales or use tax due on trans- 18 actions processed by the certified service provider unless the seller misrep- 19 resented the type of items it sells or committed fraud. In the absence of 20 probable cause to believe that the seller has committed fraud or made a mate- 21 rial misrepresentation, the seller is not subject to audit on the transactions 22 processed by the certified service provider. A seller is subject to audit for 23 transactions not processed by the certified service provider. The member 24 states acting jointly may perform a system check of the seller and review the 25 seller's procedures to determine if the certified service provider's system is 26 functioning properly and the extent to which the seller's transactions are 27 being processed by the certified service provider. 28 (2) A person that provides a certified automated system is responsible 29 for the proper functioning of that system and is liable to the state for 30 underpayments of tax attributable to errors in the functioning of the certi- 31 fied automated system. A seller that uses a certified automated system 32 remains responsible and is liable to the state for reporting and remitting 33 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 63-4611. 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 63-4501 through 63-4509, Idaho Code, shall be in full 44 force and effect on and after July 1, 2005; Sections 63-4510 and 63-4511, 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 2005.
STATEMENT OF PURPOSE RS 15082 Idaho retailers are subject to unfair price competition from remote sellers (Internet and catalog) who do not have a presence (nexus) in Idaho. Such remote sellers often advertise the fact no state sales tax is charged on purchases made from them. The rapid increase in Internet sales is exacerbating this problem. It is estimated within the next few years, remote sellers not collecting sales tax on sales in Idaho, will shift over $3 billion in sales out of Idaho and result in over $150 million in uncollected state sales tax. This problem also affects other sales taxing states and jurisdictions similarly (46 states and the District of Columbia assess sales tax). Most sales taxing states have come together to simplify or streamline their sales tax structures so that the U.S. Congress can pass legislation to require remote sellers to collect applicable sales taxes for those states who are signatories to the agreement. Idaho is one of five states that has not acted upon this important matter. To date, the Idaho legislature has not authorized Idaho to participate in the development of the Streamlined Sales Tax agreement and vote on the agreement terms. This legislation allows Idaho to be a full voting participant in crafting and approving the Streamlined Sales Tax Agreement. It does not allow Idaho to sign the agreement. Approval for Idaho to sign the agreement will require separate legislation in a future legislative session. FISCAL NOTE This legislation deals with public policy issues and will not raise any tax revenue. The fiscal impact consists of the cost of a Tax Commission representative(s) attendance at meetings of the national committee. Contact Name: Pam Eaton, Idaho Retailers Association Phone: 342-0010 Name: Senators Hal Bunderson, John Andreason Phone: 332-1319, 332-1333 Name: Representatives Bill Deal, Maxine Bell STATEMENT OF PURPOSE/FISCAL NOTE S 1201