I_TaxTask_2018A 07/12/2018 10:00:52 AM Committee Summary

The task force was called to order.  The chair and vice-chair welcomed members of the task force and talked about legislation that the task force forwarded last year requiring a request for information be issued for a software reporting system.

Representative Kraft-Tharp talked about some administrative items, including new staff, new rooms, and the process of being recognized by the Chair before speaking.

Task force members introduced themselves and discussed what they would like to get out of the task force this interim.

Task force member discussed working with a collaborative attitude and an interest in learning more about the decision in the South Dakota v. Wayfair case.  Discussion continued about other areas of interest and goals for the task force.

The task force's legislative staff introduced themselves and discussed the work that they can do for the task force including writing fiscal notes, drafting bills, and conducting research.

Brendon Reese, Deputy Director, Taxation Policy and Legal Analysis, and Karen Picariello, Purchasing and Contract Services Manager, both representing the Department of Revenue (DOR), discussed a request for information (RFI) for an electronic sales and use tax simplification tax system issued pursuant to House Bill 18-1022. Task force members received summary of action steps to date with regard to the implementation of HB 18-1022 (Attachment A).  The department explained that it worked with the Colorado Municipal League and Colorado Counties, Inc. on the language of the RFI.

Mr. Reese and Ms. Picariello explained that the RFI response deadline was May 31, and that there were four respondents.  Mr. Reese said that if a request for proposals is issued there may be additional respondents.  He also explained that the responses are confidential, so DOR can share only limited information with the task force.

Mr. Reese and Ms. Picariello responded to task force questions about next steps with regard to the review of the responses to the RFI and the need for legislation.

Ms. Picarello discussed different procurement options available to the department and the state.

Task force discussion with DOR representatives continued about the RFI review process and what information will be shared with the task force.  Mr. Reese said the goal of the RFI process is to gather as much information as possible about the marketplace in order to make an informed decision about next steps.  He also explained that it is important to maintain a balance between keeping information confidential and providing information to the task force.

Mr. Reese next presented on various legislation adopted during the 2018 legislative session that concerned sales and use taxes.  A copy of his presentation was distributed to the committee (Attachment B).

Task force members shared their concern with some of the data reporting requirements of the Department of revenue and also asked if the task force can look at the cost of an address database that the state can provide to businesses for sales tax purposes.

Task force members shared their concern with some of the DOR data reporting requirements and also asked if the task force can look at the cost of an single address locator database that the state can provide to businesses for sales tax purposes.

Dianne Criswell, Legislative and Policy Advocate, Colorado Municipal League (CML), and Geoff Wilson, Special Counsel, Murray Dahl Kuechnenmeister Renaud LLP, provided an update on a project to encourage municipalities to adopt a set of standard definitions for purpose of assessing sales and use taxes.  Ms. Criswell and Mr. Wilson shared date about the municipalities that have adopted standard definitions.

Ms. Criswell explained that CML is trying to remove as many obstacles to adopting the standard definitions as possible.  Mr. Wilson said he has worked with several municipalities to make necessary changes to the definitions in order to avoid a TABOR election.

Ms. Criswell and Mr. Wilson addressed task force member questions.  Ms. Criswell discussed her experience in Washington joining the Streamlined Sales and Use Tax Agreement and said that it took eight to ten years to streamline.  She said that CML can encourage its members to adopt standard definitions, but that adopting these definitions is optional.  She also discussed some of the challenges municipalities face in adopting standard definitions. 

Mr. Wilson responded to a concern raised by members of the task force that the new definitions can sometimes expand the tax base of a municipality.

The committee recessed for lunch.

The meeting resumed. Esther van Mourik, Office of Legislative Legal Services, reviewed the U.S. Supreme Court decision in South Dakota v. Wayfair. Ms. van Mourik discussed the history of the case. She explained that DOR is reviewing how the decision will affect its operations.

Ms. van Mourik explained that her advice to the General Assembly is move slowly in determining how to implement any changes to its sales and use tax system. She said this is also the advice offered by the National Conference of State Legislatures. Ms. van Mourik discussed whether Colorado will be required to join the Streamlined Sales and Use Tax Agreement. She also discussed whether proposed changes at the state level could require a vote of the people because of TABOR provisions.

Ms. van Mourik responded to questions from the committee. Mr. Reese commented on the process of how the changes under Wayfair may be enacted. Ms. Gini Pingenot, Colorado Counties, Inc., asked about how other states may be reacting to the Wayfair decision.

Committee discussion continued on the ways the Wayfair decision may affect the state and the work of the task force. Ms. van Mourik continued to respond to committee questions.

Mr. Phil Horowitz, State and Local Tax Director, Moss Adams, and formerly with the Department of Revenue, came to the table to comment on Ms. van Mourik's presentation and to respond to questions about the implications of the Wayfair decision on the state's sales and use tax system.

Ms. van Mourik explained that recent conversations about the Wayfair decision at a National Conference of State Legislatures conference have been posted on Facebook.

Mr. Fred Nicely, Senior Tax Counsel, Council on State Taxation (COST), and Mr. Craig Johnson, Executive Director, Streamlined Sales Tax Governing Board, Inc. presented on the Colorado sales and use tax system as compared to other states and discussed the implications of the Wayfair decision.  Mr. Nicely and Mr. Johnson described the work of their organizations.

Mr. Nicely discussed the decision in the Wayfair case. He described deciding factors in the case, such as an "economic and virtual presence" test as opposed to the former requirement that a business be physically present in a state. Mr. Johnson also commented on the court's findings in the case. Mr. Nicely and Mr. Johnson responded to questions from the committee.

The presentation continued.

Mr. Johnson discussed the key features of the Streamlined Sales and Use Tax Agreement (SSUTA).  He also responded to committee questions.  Mr. Nicely also responded to questions.

Mr. Johnson continued to discuss the key features of the SSUTA. He and Mr. Nicely next discussed some ways that Colorado can simplify its sales and use tax system.

Mr. Nicely presented Colorado's grades from the 2018 COST scorecard to grade state tax systems. He also responded to committee questions.

Mr. Jeff Hansen, representing the City of Golden, testified about the work of the task force during the 2017 interim and the testimony heard by the committee during the day's hearing.

Mr. Horowitz returned to the table to respond to information included in the presentations made by COST and the SSUTA Governing Board earlier in the day.

Representative Kraft-Tharp asked the task force members to comment on whether the Wayfair decision should affect the work of the task force. Discussion ensued.

Discussion continued on the question of whether the Wayfair decision should effect the work of the task force.