I_TaxTask_2018A 07/26/2018 10:05:29 AM Committee Summary

Mr. Max Behlke, Director of Budget and Tax, National Conference of State Legislatures, and Mr. Joel Griffith, Director, Center for State Fiscal Reform, were in attendance to discuss the South Dakota v. Wayfair decision. Mr. Behlke distributed an information document, "Principles of State Implementation post South Dakota v. Wayfair" and walked the task force through a presentation (Attachments A and B, respectively).

Mr. Behlke continued his presentation. He next discussed state marketplace laws.

Mr. Griffith discussed the South Dakota v. Wayfair decision and provided historical context about taxation and trade in the United States.  A copy of his testimony can be found in Attachment C.

Mr. Griffith next discussed retail sales, ecommerce, and trends in sales tax collections. He also made some recommendations about how changes to online sales tax collections should be legislated.

Mr. Behlke responded to committee questions about remote sales taxes. Mr. Griffith also responded to committee questions. Members of the committee commented on Mr. Griffith's presentation.

Mr. Behlke and Mr. Griffith continued to respond to task force questions.

Mr. Nelson commented on the presentations and the work of the task force.

Mr. Behlke commented on the task force discussion. Ms. Vorndran commented on the presentations and the task force discussion. Discussion ensued.

Task force discussion continued. Mr. Behlke responded to additional questions.

Mr. Ed DeCecco, Office of Legislative Legal Services, responded to a question from the task force about whether legislation is required under various scenarios. Task force members and Mr. Behlke also commented.

 Mr. Matthew Scott, Senior Director, Division of Taxation, and Ms. Karen Picariello, Purchasing and Contract Services Manager, both representing the Department of Revenue (DOR), updated the task force about the process of reviewing responses to the request for information (RFI) issued pursuant to House Bill 18-1022.  Task force members expressed concen about having information about the RFI responses with enough time to prepare for the August 16th meeting.

The DOR representatives said they will try and accommodate the task force's timeline and that they will try and work with the vendors to get the task force the information that they need.

Task force members asked for a timeline from the DOR for the RFP process.

The task force discussed some process questions about drafting bills.

Ms. Picariello said that legislation is not required for procurement.  Mr Scott said that if there are specific items in the RFP that may require a change in law.

The task force asked DOR to start reviewing responses to the RFI and identify any legislation that may be required to comply with a RFP. They also asked for time to review a summary of this information before the committee needs to ask for a bill request.

The task force discussed the scope of bills that the committee could recommend.

The DOR handed out a matrix of the RFI responses. (Attachment D).

Ms. Vorndran, who is involved in the review of the responses to the RFI, stated that in her opinion there are two vendors that could meet the requirements of the RFI, but not a single vendor that can accomplish everything listed in the RFI.

Ms. Meredith Moon, Legislative Council Staff, introduced herself and discussed what her presentation will include.  A copy of her presentation was distributed to the task force members (Attachment E).

Ms. Moon discussed the requirements of the RFI as compared to what is required to participate in the Streamlined Sales Tax Project. She also discussed different cost estimates for various electronic systems.

Ms. Moon talked about the experience in other states that have created electronic sales tax systmes.  Louisiana has a complicated sales tax system, but set up a dual system with a single point of remittance and administration for out-of-state retailers.

Task force members asked how Louisiana handled different rates on different products and how that would impact bond holders.

The task force discussed whether having a higher rate for out-of-state retailers would be unconstitutional and what incentives might encourage out-of-state retailers to collect taxes.

Mr. Larson Silbaugh, Legislative Council Staff, introduced himself and discussed the topic of his presentation.  Task force members received a copy of his presentation (Attachment F).

Mr. Silbaugh discussed the difference between the sales and the use tax and the fact that they are complementary.  He showed a graph from his presentation regarding sales and use tax collections.  He then asked for expert opinions about local use tax collections from the task force members.  Ms. Hines responded that Larimer County collects use tax only on building materials and motor vehicles.  Mr. Wilson added that statutory cities operate the same way.

Task force discussion continued about local use tax collections.

Mr. Silbaugh continued with his presentation and mentioned DOR does not collect local use taxes.  He showed maps comparing county and municipal collections, as well as home rule collections.

Mr. Silbaugh requested input from the task force regarding tax exempt construction projects.  Ms. Hines responded.

Mr. Silbaugh continued presenting on use tax related to construction and the delivery of building materials.

Mr Silbaugh ended his presentation and the task force discussion about local and state use tax collection ensued.

Mr. Scott and Mr. Eric Myers, Senior Director, Taxpayer Services Director, DOR, discussed the collection and remittance of use tax to the state and local governments.  The task force members received a handout, prepared by DOR, about the use tax (Attachment G).  Mr. Scott discussed enforcement of use tax compliance.  He talked about DOR's stance on use tax in light of the Wayfair decision.  He stated that he believes that the importance of use tax will decrease.

Mr. Myers responded to a question about a change on the income tax form to include use tax line.  Mr. Scott responded to questions about rulemaking at the department and the non-enforcement of use tax compliance.

The discussion continued amongst the task force and DOR.

Mr. Scott responded to additional questions about contractor billing and taxing.  The task force and DOR discussed training, Wayfair, use tax, and voluntary compliance.

The committee recessed.

The chair called the task force back to order.  A panel of construction industry experts introduced themselves and shared their experience with use tax.  The panelists included Ms. Christine Heath, Regional Controller, Adolfson & Peterson Construction; Ms. Vickie Hurst, Director, Us Indirect Tax, LafargeHolcim; Ms. Stephanie Ziegler, Assistant Controller, Brannan Sand and Gravel Company, and; Mr. Scott Van Deren, Business Development, Drake-Williams Steel.

The panelists responded to task force questions.  Ms. Heath discussed changes that would simplifiy use tax collections.  The discussion continued about the challenges of working across municipalities.

The discussion continued regarding software purchased to comply with use tax regulations across municipalities and the state.

The discussion of software continued regarding whether business users are willing to pay for a reliable, state-run address system. The panelists representing larger versus smaller businesses gave their opinions.  Decisions regarding implementing expensive software systems were discussed, as well as the pros and cons of different software programs.  Some panelists discussed the trial and error process of figuring out how to best comply with different municipalities.

Ms. Hurst responded to a question about which state has the best example of a well-functioning sales and use tax system.  The panelists agreed that creating standard rules is the most important change desired.

The discussion continued between the panel and task force regarding simplifying rules across municipalities.

The task force continued with a discussion about standardization between municipalities and state. Mr Nelson asked if the task force can agree on four points of standardization and clarification.

Before the public testimony began, the discussion regarding standardization continued among task force members.

Ms. Laura Williams, representing Martin Marietta, introduced herself and discussed challenges associated with collecting and remitting sales and use tax.  A copy of Ms. William's testimony can be found in Attachment H.

Ms. Williams responded to questions from the task force.

Ms. Brandy Alger, representing Mortenson Construction, introduced herself and shared her opinion about the collection and remittance of use tax.

Task force discussion ensued about potential legislation, outstanding questions, and the next meeting.