Streamlined Sales Tax Advisory Council

July 9, 2007, Meeting Minutes

Hoover State Office Building

Present: Kristi Magill, Mark Schuling, Dave Casey, Dave Krutzfeldt, Ed Wallace, Dick Koberg, Steve Roberts, Jim Henter, Ross Larson and Representative Christopher Rants. Chris Theisen and Ann Stocker joined the meeting via conference call. Jim Miller from the Attorney General's Office and Jeff Aten and Larry Paxton from the department were in attendance.

I. Welcome, Introductions & Opening Comments

Mark Schuling and Kristi Magill opened the meeting at 10:04 a.m. by welcoming everyone and thanking them for making themselves available. Representative Rants joined the Council meeting to discuss the impact on Iowa businesses issue.

II. National Meetings in Detroit, MI (June 20-23, 2007)

Kristi Magill, Dave Casey and Larry Paxton attended the Detroit meeting. Mark Schuling and Ed Wallace also attended the Detroit meetings.

A. Business Advisory Council (BAC)

Kristi reported that a fair amount of time at the BAC meeting was spent on rules and procedural issues. The big topics from a technical standpoint were digital goods, direct mail, bundling, and replacement taxes.

  • Digital goods didn't get resolved in Detroit. The business community wants to have a separate and distinct definition for digital goods.
  • Direct mail definition & sourcing - Discussed what changes needed to be made to the Agreement. A direct mail coalition unrelated to SSTP has been formed to work with BAC on the direct mail issue. Business correspondences such as bank statements, visa bills, currently fall under the definition of direct mail sourcing. BAC is concerned that the current treatment of business correspondence as direct mail, which is separate and distinct from direct mail advertising, results in unintended sourcing changes and other problems for business. A proposed rule to Governing Board was handed out to the Council. Notification and comments are to be provided by July 20, 2007.

Ed Wallace added that BAC needs to educate this new coalition. The coalition is just getting involved in Streamline.

Kristi brought up that the sales price definition includes “any services necessary to complete the transaction.” BAC believes that the Governing Board should clarify.
  • Replacement tax issue was discussed. BAC wants to see something added to SSTUA. This was deferred.

B. State & Local Advisory Council (SLAC)

  • Replacement tax issue – This was referred to the NCSL Task Force and it is on the agenda for August NCSL work group to handle.
  • Delivery Charges - Michigan has a rule on delivery charges (handout) where states can toggle on or off. Iowa is already exempt. The rule is being requested so other states can get legislation through if needed. This came out of the direct mail issue and Michigan took the lead. The rule is out for comments.
  • Destination sourcing issue – Small businesses are affected such as pizza delivery as an example. Alternative sourcing proposals put forward from Ohio are more complex and not workable. These were deferred. President of Governing Board created a special 15-member group to look at these proposals. Senator Luke Kenley from Indiana will head up the group. The group will include representatives of full member, associate member and other states that are most directly impacted by destination sourcing. It will also include representatives from BAC. Kristi indicated that the task force is charged to work hard and return with options to Kansas City for the next Governing Board meeting.

From a tax administrative position, every time a state wants to change something the state should not have to amend its state laws. It defeats the idea of simplification. One option is that three-fourths of the states need to approve a specific state's exceptions to destination sourcing before a state can come forward with a change.

Federal legislation submitted by Wyoming Senator Wyden was handed out; in that legislation there is a $5 million de minimis standard for remote sales exemption.

The Council discussed de minimis standards. Some of the Council felt de minimis standard has potential, but what Ohio wanted was more like Ohio specific. Some states have already made the change and are concerned about a new standard.

Utah, Tennessee, and Ohio are at risk to fall out of compliance. Ohio is the largest state currently in the project. Dave challenged our Council to come up with a solution.

The special Task Force will meet in Boston in August. Some think the Task Force will come to KC with an amendment to the Agreement that is a broad-based proposal so Ohio could pass legislation. If there are comments for the Task Force, please let Kristi know.

C. Governing Board Meeting

  • Associate member state status is set to expire on December 31, 2007. Discussed what should be done or to extend that date for 2 more years. The Task Force will also examine the issue of associate member state status.
  • Digital Products – There's a big divide between businesses and the states. There was no resolution in Detroit and the issue will be again on the next Governing Board meeting agenda.
  • Direct Mail – Proposed rules – We have the opportunity to make comments by the 19th of July.
  • Amendment Handling – Iowa informed legislators in the beginning to be prepared for an annual SST bill. There was concern that States didn't know what was being voted on. GB is looking at how amendments are adopted and will come up with some rules. There were some amendments in Detroit, but nothing that would need legislation.
  • Status of States: 15 Full Member States

The status of the Associate Member States:

  • Washington was voted in as an Associate Member effective July 1, 2007, to be the 16th Full Member effective 7/1/08.
  • Arkansas and Wyoming will come on 10/1/07.
  • Nevada – constitutional vote needed
  • States without Legislation: Utah , Tennessee & Ohio

III. Update on Legislation & Rules

As of right now, there have been no changes to the SSUTA that would require legislation and no rules are ready to go.

IV. Update on Registration & Revenue Tracking

1,036 Registered: 130 model 1 sellers, 57 model 2 sellers and 849 model 4 sellers. Of the total registered, 28 are located in Iowa.

As of March 31, 2007, the amount collected for fiscal year 2007 is $6,525,000.

V. Analysis Required by Iowa State Legislature Regarding Impact on Iowa Businesses.

Kristi provided some history on the legislative request made to the Director of Revenue and the Council to determine the number of sellers impacted by the SST Agreement, what additional administrative burden exists for these sellers and provide recommendations to address the additional burden. A working group of the Council met and prepared the paper “Assistance for Iowa Retailers Affected by Streamlined Sales Tax” which was shared with the entire Council on April 24, 2007, via e-mail.

The Council discussed the possibility of one rate for Iowa sales tax. Representative Rants indicated that it needed to be driven by the business community. It was decided to hold off on the recommendations to the legislature until the Task Force meets in Kansas City.

The Council went through “Assistance for Iowa Retailers Affected by Streamlined Sales Tax” paper. Casey provided some clarification on bullet #7 regarding the number of retailers affected. He also commented that these recommendations weren't formal or cast in stone; they are just a tiered format with parameters.

Darwin raised potential constitutional issues. The Committee will follow-up with the legislature after the September meeting.

VI. Future Streamlined Sales Tax National Meetings.

A. Kansas City, KS (September 17-20, 2007)

BAC is the 17th, SLAC is the 18th and morning of the 19th & Governing Board is 19th & 20th, to be held at the Great Wolf Lodge in Kansas City, KS. Details are not out yet.

B. December Meeting – This meeting has not been set yet.

There was discussion it could be a teleconference. Senator Cook, President of the Governing Board, will be leaving in September. Joan Wagnon of Kansas will be the new President. The position of President of the Governing Board rotates between an elected official and an appointed official.

VII. Set Next Advisory Council Meeting

The next Advisory Council meeting will be the 2nd or 3rd Monday in October. Diane will send an e-mail. Please note: Kristi will be located for the next 10 months in Washington, D.C. Her e-mail is the same, but please use her cell number to contact her. Her cell number is 319-350-2845.

VIII. Adjournment

Meeting was adjourned at 12:04 PM.