Streamlined Sales Tax Advisory Council

February 10, 2006, Meeting Minutes

Hoover State Office Building

I.  Opening Comments

Mark Schuling began the meeting by introducing himself and gave a short bio to the Advisory Council. Introductions by the Advisory Council members included Senator Bill Dotzler a new delegate to the Governing Board and member of the Advisory Council.

Kristi Magill discussed some “to do” items for the co-chairs that were outstanding from the November 1, 2005 meeting. One item was the charge by the Council to draft a letter to the Governing Board expressing the Council's position on CSP issues and the urgency to get these issues resolved. Members were asked to provide Kristi comments on the draft letter. Another item was the annual report to the 2006 Iowa General Assembly.

Mark expressed his appreciation to Kristi and Don Cooper for the time they have spent attending SSTP meetings and thanked them for their participation.

II.  Update from National Meetings

A. Discussion of Ohio Sourcing Proposal – Kristi's perspective from the Business Advisory Council (BAC) is that Ohio continues to struggle with changing from an origin based sourcing system to a destination based system. Ohio has provided two proposals to the BAC. From a business standpoint, Kristi doesn't think either proposal will work. The first version has constitutionality issues and the second version has the seller opting out and choosing to go with the highest rate possible. Steve Krantz is drafting BAC's response to the Governing Board regarding these proposals. Kristi will share it with the Advisory Council when it becomes available. The State and Local Advisory Council (SLAC) is waiting for BAC's response.

For several states with local jurisdiction, origin based sourcing is a very significant issue. The state of Washington 's issue also created a shift in the revenue base from one local jurisdiction to another.

B. Update on Formation of the SSTP Business Advisory Council – It's official, it's up and running. The BAC had its first meeting in Phoenix where the Board of Directors was voted on (including our own Kristi Magill) and the bylaws were established. Kristi is working on drafting rules and procedures for responding to the Governing Board decisions. There are seats available on the BAC. The Council engaged in a discussion on the definition of small, large and mid-sized businesses.

C. Status of Contracting with CSP's – Two things need to happen: 1) certify the CSP's and 2) determine a compensation methodology.

Jeff Aten reported that one state has certified Taxware and another state certified Exactor. Many states have passed parts, but Iowa is waiting for additional information and could possibly certify within the next 2 weeks.

The Council discussed the 4 different model options with Senator Dotzler.

Compensation packages were discussed and not all states are in agreement regarding old nexus verses new nexus in the state.

Don indicated that the nine member Executive Committee is working mostly on compensation methodology to recommend to the Governing Board within the next 2 months. The Advisory Council members discussed several ideas for methodology to compensate retailers.

D. SSTP Agreement Amendments – There was one amendment to the Agreement at the Phoenix meeting. It will be included in this year's SSTP legislation. It's effective on January 1, 2008.

E. Other – A lot of technical issues are being discussed by BAC and SLAC. Budget administration is part of the Governing Board's responsibilities. Scott Peterson is now the full time Executive Director. Along with the Executive Committee, several other committees have been established: the Finance Committee is working on budget; the Compliance Review & Interpretation Committee handles requests for interpretations; and there is an Issues Resolution Committee.

The Council discussed the 10 states/20 percent of the population criteria, associate states and full member states.

The Council also discussed having Des Moines be SSTP's headquarters. Scott is currently working out of his home in Pierre, South Dakota. Don has offered Iowa to host headquarters without rent expenses. Steve Roberts thinks IDED should be notified. Mark will follow-up. The Council agrees we should pursue the possibility of headquartering SSTP in Iowa.

Stacey Johnson questioned the compensation issue for all sellers. The Council discussed what Iowa 's vote to the Governing Board will be on this issue. Mark is still reviewing this issue and will let everyone know where the department stands on this issue.

III. Update on Registrations & Tracking Revenue

Larry Paxton provided a handout indicating four hundred businesses have registered. The Council was also reminded that the model 4's only have to file and remit. It's too early to discuss revenue collections; the department will have a better idea the end of March.

Registration is on track. It seems to be attracting businesses of all sizes. The centralized registration does contain questions regarding nexus in a given state.

IV. Update on SSTP Legislation

Before we discussed legislation, a destination sourcing paper was handed out by Dave Casey. It has been distributed to the department's audit staff and taxpayer specialists, it's on the website, and Darwin Clupper will draft rules based on this paper. Diane will e-mail it to the Council. This document is what Revenue employees will be working from.

A new Section 502 (State review and approval of certified automated system software and certain liability relief) was added to the Agreement on January 13, 2006 . This year's SSTP legislation includes this amendment.

Legislation that was distributed to the Council prior to the meeting resulted in feedback only from Lucy Hardy who only had a few minor specific changes. Section 6 relaxed good faith exemption certificates for all retailers will apply upon enactment of the bill. Sections 8 and 9 also reflected the changes required by new Section 502 of the Agreement. If anyone has any issues or changes, please contact Dave Casey. All provisions except Section 6 are effective January 1, 2008 . Another reminder was made to the Council to expect having a SSTP Legislation update every year due to amendments to the Agreement. Stacey suggested the Legislation start in the Senate.

V. Review of the Draft Report to the 2006 General Assembly Regarding 2005 Activities

Diane will send copies to absent Council members. Kristi asked Council members to provide any changes to the draft. The Council went over the report and made suggested changes. Kristi will e-mail the final version for the Council to review. It was also suggested that a brief presentation be made to the House and Senate. Senator Dotzler asked that as a delegate the Council keep him informed. He also stated that as a delegate, he would be representing the opinions of this Advisory Council.

The question regarding the status of the national legislation was posed. There are 2 proposals submitted by two Senators. The bills S2152 and S2153 are both on the Senate side with different approaches on small business exemptions. There have been no proposals on the House side.

VI. Future National Meetings

The Governing Board will be meeting on a quarterly basis as stated in its bylaws. SLAC and BAC are meeting almost every other month and discussing a lot of issues. There is hope that the Governing Board, SLAC & BAC quarterly meetings will be scheduled together. It's not going to happen right away since the Governing Board is scheduled for April 18-19 in Indianapolis and SLAC & BAC are scheduled for March 6-8 and May 10-12. The May meeting will be held in Des Moines.

VII. Set Next Meeting

The next Advisory Council meeting will be scheduled after the Governing Board meeting in April 2006.

VIII. Adjournment

Mark adjourned the meeting.