| The Conforming States Committee (CSC) and the Streamlined Sales Tax Project (SSTP) met in Atlanta from Sunday, March 6 through Wednesday, March 9. This report will not cover all issues tackled during the four days of deliberations as the CCH report distributed earlier already provided an in-depth look at issues such as definitions for buydowns and a bundled transaction. This report includes: • Temporary Waivers • Small Business Concerns • Eye On The Calendar • Issues and Thresholds To Be Met • Implementing States • Petitioning States • Conforming States Committee • Companies Selected for Certification Process Temporary Waivers This report will concentrate on the emergence of discussions concerning a partial temporary waiver that will be made available to states through some form of short-term Associate Membership that could lend a hand to small businesses asking states to delay destination sourcing and offer a little more breathing space to those states non-compliant on other provisions such as definitions. This concept would give states delaying destination sourcing a working demonstration of benefits gained from CSP's and those states non-compliant on other provisions an illustration of advantages to be gained from compliance without granting these states advantages of full membership. Negotiations are ongoing regarding specific language as this would be an amendment to the Streamlined Sales and Use Tax Agreement offered to Implementing States for a vote on Saturday, April 16. Small Business Concerns Appeals by many small businesses for extra time to implement destination sourcing was a major driving force for negotiations in Atlanta that will likely culminate in establishing a form of limited temporary waiver for states that have enacted all articles of the Streamlined Sales and Use Tax Agreement but need extra time for implementation of some provisions. One important goal is to move forward administrative features of the system favorable to small business during a transitory period in which the Associate Membership would be established. Part of the problem has been a cart before the horse situation. It appears that software systems provided by the Certified Service Providers (CSP) so central to the system will not be fully available until we're on the advent of the Governing Board. This will make the service available to remote sellers wanting access after the system is inaugurated but not accessible to in-state businesses expected to make the sourcing change beforehand. Many small businesses also have the issue of obtaining accounting systems that can access the CSP service. In addition some states have not completed their required databases that will be used by the CSP in providing the service to sellers. If this predicament had been foreseen it likely would have been addressed before the Agreement was finalized but now can be rectified with an amendment on April 16. The question is how that amendment would be written. Ohio suggests a multi-year tiered transition to destination sourcing while Tennessee proposes a one year delay. However, states out of compliance on non-sourcing sections of the Agreement gain nothing from these suggested revisions. How to accomplish both while retaining integrity of the document was the issue to work through in Atlanta. Eye On The Calendar An eye on the calendar was another driving force in negotiations among private and public sector representatives as well as between them. Success at three upcoming meetings scheduled Saturday, April 16, Friday, July 1 and Saturday, October 1 will determine if Streamline is launched this year or if it will suffer a setback. Success at each is necessary to move to the next. Delay of the July vote on state petitions to join the system or failure to approve enough petitions to form a Governing Board in October would be major setbacks. Business representatives were united in wanting the end game to be based on compliance to the Agreement. It was determining among competing approaches that kept discussion lively. Issues and Thresholds To Be Met The obstacles to be overcome in Atlanta included giving more time to a few states to implement all provisions of the Agreement while guarding against a reinterpretation of the document that would allow full membership for non-compliance states. Private sector and state government representatives met for a full day in separate rooms to tackle such questions. Some government representatives felt business was staking out unreasonable demands that if not met would cause the private sector to walk away from the table. In a counter view, many business representatives feared states would barter away advances in uniformity and simplicity gained over the last 5 years in exchange for enough votes on state petitions to form the Governing Board. Gaining authority to move forward with critical administrative features of the system will necessitate Associate Member states being counted toward the 10 state and 20% population threshold needed to activate the Agreement. As a case in point, this will allow the signing of contracts with CSP's accessed by voluntary sellers. However, Associate Members will not have a right to use to the Central Registration System through which these voluntary sellers enroll. Fears that Associate Members might rewrite the Agreement to accommodate their non-compliance must be alleviated by excluding Associate Members from votes on amendments to or interpretation of the Agreement and perhaps temporarily realigning the amendment process. As indicated above, maintaining the 20% population threshold is seen as significant. Negotiations on Associate Membership criteria must maintain this threshold without key stakeholders walking away from the table over objections to revisions in the Agreement. Negotiators must be certain the ghost of Rodney Dangerfield is not claiming the Agreement gets no respect. It is important to point out that Associate Member states will be watching some aspects of the system through the window until they fully implement the Agreement. That window will not stay open beyond 2007. If a compromise is obtained for such an amendment it allows time for those states partially compliant to show legislative policymakers and small businesses that the system is up and running and awaiting with benefits to be gained from their full participation. I'll close this section with two points. First, passage of this temporary Associate Membership is not inevitable on April 16. We'll have to see how events unfold. Second, if passed as an amendment to the Agreement this limited time offer will expire with Associate Member states gaining full compliance or leaving the system entirely. Implementing States Streamlined Sales Tax Implementing States will convene in Washington, D.C. on Saturday, April 16. Delegates to Implementing States from 40 states and the District of Columbia are in many instances revenue officials assigned to Streamlined Sales Tax Project (SSTP) and state legislators serving on the National Conference of State Legislatures (NCSL) Task Force. You also have Delegates from the private sector such as state retail association executives and Committee On State Taxation (COST) Tax Counsel Stephen Kranz, Esq. This meeting of Implementing States is a necessary precursor to a vote on states filing petitions for membership that will take place at the Petitioning States meeting on July 1. Implementing States delegates will pave the way by voting on 16 proposed amendments to the Streamlined Sales and Use Tax Agreement. Success or failure of each amendment will hinge on merit of the proposal and/or a calculation of how it might detrimentally or advantageously tip the balance needed for success at the Petitioning States meeting on Friday, July 1. NCSL has made all the amendments available online at: http://www.ncsl.org/programs/fiscal/tctelcom.htm . Petitioning States At the Friday, July 1 session of Petitioning States a Compliance Committee will report on the level of conformity with the Agreement reached by each state petitioning for membership. Following public comment a vote on each petitioning state will take place. To be judged in substantial compliance with the Agreement a petitioning state must receive votes from three-fourths of the other petitioning states. If sufficient states are found to be in substantial compliance, the interstate Agreement becomes effective and administrative steps will be activated for establishment of the permanent Governing Board on October 1. Each member state accepted at the Petitioning States meeting will be entitled to one vote on the Governing Board. The Streamlined Sales Tax Project will become an advisory body to this new Governing Board and a nominating committee will move forward with recommending a slate of officers to the Governing Board meeting October 1. Success on July 1 will also initiate the process of an Executive Search Committee looking for a permanent Executive Director. Conforming States Committee North Dakota Senator Dwight Cook has filled the open co-chair position of the Conforming States Committee joining the second Co-Chair Tennessee Commissioner Loren Chumley. They will be working with Conforming States Committee Interim Director Scott Peterson to continue preparatory work toward formation of the Governing Board. CSC Interim Director Scott Peterson reported that his committee had selected 7 submissions in response to the Certified Service Providers RFP for testing and certification. The next 6 months will be a ratification process at end of which those to be certified will be known. It is assumed that not all respondents will be found qualified. Separately, there were 10 responses on the Central Registration System RFP and a workgroup is now evaluating them. Companies Selected for Certification Process A critical part of the Streamline process is the certification of software that retailers can use to ease their burden of collecting state and local sales tax. The Conforming States Committee drafted and distributed a request for proposals seeking companies interested in having states review and potentially certify their software product. The following companies have been selected to be the first to go through the state certification process: Avalara EDS - U.S. Government Solutions Exactor, Inc. Paychex, Inc. Sales Tax Services Salis Taxware, LP |