Streamlined Sales Tax Advisory Council

August 19, 2004, Meeting Minutes

I. Opening Comments

Mike Ralston started the meeting with a roll call of members joining us by telephone. Kristi Magill thought most of this meeting would consist of an update on what transpired in the Chicago meeting. It was mentioned that Diane Hardt and Steve Krantz were speakers at the MSATA (Midwestern States Association of Tax Administrators) conference and did an excellent job.

II. Update on Implementation of Iowa SSTP Provisions

a. Definitions

Candy – The definition of candy, particularly chocolate chips and almond bark, was discussed in Chicago. Prior to Chicago, Don had conducted an informal survey of other states and had even discussed the issue with Scott Peterson, co-chair, National SSTP. The SSTP group takes the position that chocolate chips, almond bark, etc., should be classified as candy. Thus, the dilemma of still saying the items are baking ingredients and be found out of conformance or change our definition. The Council agreed that the states have to be consistent. Jerry Fleagle was obviously concerned, stating this change in position was exactly what he had wanted to avoid. Warren Townsend noted that fruit roll-ups are also an issue, and that Don did a good job in Chicago trying to voice our side. All along Iowa thought we were clear on the definition of candy, then it comes out that this position was discussed in a Working Group meeting. The department will relax enforcement on these items.

The Council recognized a need for a process to be in place when changes like these occur. There are bound to be more instances such as this. The process will need to be similar to rules in the Agreement on making changes. We need to be consistent with the Agreement on allowing time to implement changes, i.e., if there are fewer than 60 days left in the quarter, then changes won’t occur until the beginning of the next quarter.

Sales Price/buy downs – The issue in Iowa was with cigarettes. It’s a complex area and this topic was referred back to the Working Group. Warren gave a tip to look at the cash register tape. If it’s shown on the tape, then it’s taxable. Diane will mail copies of Government and Business documents from the meeting to the Council. This may prompt a change to the definition in the Agreement. Kristi noted that at the October meeting we may get a better feel after the Working Group has had an opportunity to try and reconcile the proposal.

b. Sourcing

The department will relax enforcement until January 1.

c. Education

Don had Wayne Cooper update the Council on Education and feedback since our July 1 implementation date. Wayne has received limited feedback. He has heard concerns on sourcing and databases, but not much more.

Streamlined Sales Tax Project education is in the forefront of our Technical Service Specialists on-going education. They’ve built the streamline information into their presentations.

Stacey Johnson (ITA) had received a considerable amount of calls in June and July; it’s dwindled now. Legislators are unaware of the details when constituents call. Stacey suggested scheduling a meeting between legislators and our group to educate and update regarding the changes in the streamlined laws.

d. Administrative Rules

Dave Casey updated the Council regarding the Administrative Rules being out on the website. As Dave has stated before, the existing rules will stay as they were before streamline legislation. We have created new rules starting with Chapter 211 the “Definitions” chapter. We will piecemeal rules to the Rules Coordinator because they can’t handle the large volume. The first set of rules is currently being circulated for internal (departmental) comments. It has three parts: Chapter 211 “Definitions”, Chapter 219 “Construction” (not a lot of change), and Chapter 231 “Exemptions” (primarily to the benefit of the consumer). These rules will be placed on the website after routed internally.

e. Rates & Boundary Database

Don predicted before Rod joined the meeting that the Rates & Boundary Database will be ready in 30 days. Rod indicated that 30 days wouldn’t be a problem. The Department purchased information from a company and we’re building the system ourselves. We’re having trouble with Vedic City not being properly identified. The department will have the database next week. We will need 2 days to verify and hopefully be on the website within 10 days to 2 weeks. You can input the 5 or 9 digit zip code (9 for best results) and the database brings back jurisdictions, County, City and unincorporated area presenting the lowest tax rate.

The actually address database will be ready by the end of the calendar year. We’re looking for retailers who would download to a compressed file as testers. Also, we need retailers who have a stable customer list as testers. A retailer would provide their list to us and we provide the information back. Rod will e-mail the Council when it’s ready and is requesting feedback.

Kansas is tracking look ups on the databases and storing that information. We can do it, if that’s what everyone wants. National SSTP group wants databases put in central location by end of the year.

III. Update of National Scene

a. Federal Legislation

It’s unlikely anything will happen this year.

b. State Legislation

Legislation for unintended consequences – We will need to address these unintended consequences through our legislative packages. One item will be the rental of uniforms.

c. Proposed Effective Date of Implementation of Agreement

The effective date will not be before October 1, 2005. It will be July 1, 2005, before the 20% of the population criteria is met and the states meet conforming provisions.

d. RFP for CSP’s and Software

The RFP’s will go out in October or November. It will be March 2005 before we get responses back. There are questions to states on how much they’re going to pay on software or implementation. Some states will need to go to their legislators for appropriations. Iowa won’t need legislation; ours will be paid for from revenue generated from SSTP.

e. Cost of collections

Study determined to focus solely on post-cost to business. Kristi noted that only two or three vendors are participating in national meetings.

Business Survey – There will be a questionnaire this fall asking businesses what issues they will face in the cost of collection. It’s trying to include all sizes of business.

It’s not going to be turnkey, like previously thought. Director Ralston commented that collection of sales tax is a part of doing business in Iowa, but we’re all on the same side. Software changes will be a business cost, but we don’t know what the cost is going to be.

CSP – We need to be honest with Businesses on what their role in implementation will be.

f. Formation of the Business and Taxpayer Advisory Council

COST is the driver in keeping business at the table, but is representing its largest members (BIG business). Kristi e-mailed Steve Krantz and Joan Wagnon, Director Kansas Department of Revenue regarding her concerns on fair and equitable representation regarding the formation of this council. If this Council can think of any appropriate members, please e-mail Kristi. The Council discussed national level organizations for small business and wondered about NFIB. Also, mentioned National Retail Merchants and National Independents Grocer Association as possible representatives.

g. Other Technical Issues

The Working Group is addressing the following topics:

• Food
• Bundling
• Simplified Exemption Administration
• Telecommunications
• Amnesty provisions
• Funding mechanisms
• Holidays for school supplies – need definition

The Department believes these items create no significant impact on Iowa.

IV. Conforming States Committee

The Conforming States Committee is a bridge between the Governing Board and the Implementing States. Don and Kristi are representatives on the Conforming State Committee and Implementing States for Iowa.

a. Discussion of Subcommittees and Issues being addressed

• Org. structure
• Bylaws
• Funding
• Technology
• Rules & Procedures
• Advisory Council Committee
• Administrative Committee

Copies of the SSTP Governing Board by-laws and organizational issues will be mailed to the Council.

b. Next Meeting

Conforming States and Working Groups are meeting October 6-7-8 in Nashville.

IV. Other Issues

MTC Proposal for Registration System – There’s concern from Business that the MTC will be running and supporting it. Mike offered to write a letter to Loren Chumley and Conforming States expressing concern.

V. Set Next Meeting

The next Implementing States meeting will be in October. We set our next Advisory Council meeting for October 21 (This was changed to October 14). We will decide on whether to meet at the Hoover Building or have a teleconference.