| Streamlined Sales Tax Update - NCSL Task Force Biloxi Meeting Report The National Conference of State Legislatures (NCSL) Executive Committee Task Force on State and Local Taxation of Telecommunications and Electronic Commerce met in Biloxi, Mississippi on Friday, January 28. This update includes: The course of events at the NCSL Task Force broadly reflected recent proceedings at the Streamlined Sales Tax Project and Conforming States Committee. Public and private sector representatives recognize that the Project and Conforming States leadership together with Interim Director Scott Peterson are preparing the system for operation in October. That is when it will leave the station and many do not wish to be left standing on the platform. As public and private sector interests recognize the system is targeted for operation by yearend there is a realization that time is running short for changes to the Agreement. New definitions and rules are hurried toward completion while some long time attendees look for one last opportunity to revive provisions lost during past meetings. Overturning defeat on the rounding rule is an example from my home state of Maryland. In tandem, we see proposals by more recent participants floated in hurried efforts to amend the Agreement before a permanent Governing Board is activated in October. Those having been present for deliberations since the outset periodically cast a weary eye on the group coming in the door at this late date. Everyone is rushing to catch the train.Telecommunications The first half of the day centered on appeals by local governments for continuation of disparate treatment presently given telecommunications taxes. The National League of Cities was represented by Mayor Ken Fellman of Arvada, Colorado and Harvey Johnson, Mayor of Jackson, Mississippi spoke for the United States Conference of Mayors. As is often the case for business as well as government witnesses, statements by these local government officials at times misinterpreted provisions of the Streamline system. Such occurrences are unfortunate as members of the NCSL Task Force and long time meeting participants realize the private or public sector witness is periodically requesting an end to a perceived injustice that will not occur or is calling for acceptance of language already adopted. The net effect is in part to negate the impact of testimony. The same thing happened during afternoon testimony by spokespersons from the private sector. Review and Update State legislators heard an update on activities of the Conforming States Committee, Central Registration System and state compliance. Conforming States Committee Co-Chair Tennessee Commissioner Loren Chumley, Conforming States Committee Interim Director Scott Peterson, Council On State Taxation (COST) Tax Counsel Steve Kranz and Apria Healthcare Director of Tax Beth Ann Kendzierski provided the reports. Small Business Exemption – Federal Legislation There was no danger of people falling asleep in the afternoon when Amazon.com squared off against eBay and NetChoice with intense and animated panels of witnesses debating proposed amendments to the Small Business Exemption in congressional legislation. In previous versions of federal legislation authorizing states to require out of state sellers to collect sales and use taxes if that state has taken the necessary steps to comply with a streamlined system, Congress has allowed for a small business diminis or exemption. Sellers with less than $ 5 million in gross remote taxable sales would not be required to collect remote sales and use taxes. Should this exemption or a revised version remain in the federal legislation was the question. The current text was defended by eBay and NetChoice while Amazon.com offered revisions with debate centering on a newly suggested provision for individual sellers with text saying “A seller may not be required to collect and remit sales and use tax pursuant to subsection (e) unless the seller individually had more than $10,000 in remote sales in the preceding calendar year.” A potent force against change was a feeling that a promise made in the original language should be a promise kept. In some instances new information offered at the hearing may have altered the realization of what these promises will encompass. An example would be the pledge by states to cover costs to business for access to a Certified Service Provider (CSP). This commitment may not have anticipated the full expense of updated equipment and/or services some small businesses may require. Some questioned that both the extent of simplifications and the current technology may not have reached the point where small businesses could comply with widespread sales tax collection without incurring significant burdens. Overall, arguments for changing the small business diminis appeared to have some resonance but keeping faith with the original text of the Agreement took precedence. The Task Force voted to stay with the original text. Ohio Sourcing Proposal Ohio presented a modified version of the origin sourcing amendment that I outlined at length in my update of Monday, January 17. Rather than a permanent exemption from destination sourcing, the revised text would provide a phase out of origin sourcing for small business as a voluntary option for transition to destination sourcing. It is intended to help resolve problems created when local government successfully fought for one rate per local jurisdiction in addition to one state rate. Local governments are now struggling with the complexity thrust upon small business as a result of their own multiple tax rate victory. As mentioned at the beginning of this report, for every sincerely rationalized new proposal such as this transition from origin sourcing there are multiple interests in the public and private sectors that lost past efforts at revision. They have served notice that perhaps these old issues should be revisited if late comers are allowed to change the Agreement. Such a likelihood cited in testimony by Kevin Thompson of COST was not mere conjecture as it was subsequently asserted by an aggrieved state delegation feeling they were unreasonably defeated in a previous effort to gain an amendment. Maryland served notice that a petition to revisit the rounding rule would be forthcoming if Ohio is granted the sourcing amendment. Dennis Brown Equipment Leasing Association |