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i_taxtask_2017a_2017-09-15t09:02:53z1 Hearing Summary

Date: 09/15/2017

Location: RM 271

Final

Presentation about Streamlined Sales Tax Governing Board, Inc.



SALES AND USE TAX SIMPLIFICATION TASK FORCE


Votes: View--> Action Taken:
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09:33 AM -- Presentation about Streamlined Sales Tax Governing Board, Inc.



Mr. Craig Johnson, Streamlined Sales Tax Governing Board, Inc., and Mr. Pat Reynolds, Council on State Taxation (COST), introduced themselves.



A copy of their presentation can be found in Attachment A.



170915 AttachA.pdf170915 AttachA.pdf



Mr. Johnson described the work of the Streamlined Sales Tax Governing Board, which is a voluntary organization of 23 full-member states that have enacted the requirements within the Streamlined Sales and Use Tax Agreement. Mr. Johnson discussed how state legislators, tax administrators, the local governmental units are all involved cooperatively in the organization. The Government Finance Officers Association, the National League of Cities, the National Association of Counties, and the business community are also involved in the organization.



Mr. Reynolds discussed the role businesses play in the Streamlined organization, including the involvement of COST, other trade associations, individual businesses, accountants, and attorneys. Mr. Reynolds discussed the role that businesses play in acting as the collectors of sales taxes and their desire to properly collect for the benefit of the taxing authorities and their customers. Mr. Reynolds discussed the role of COST as a policy-driven organization and its alignment with the goals of the Streamlined organization.



Mr. Johnson described how Colorado is the only state with a statewide sales tax that is not participating in the Streamlined organization. Mr. Johnson discussed Colorado's unique challenges due to TABOR and home rule constitutional issues.



Mr. Johnson continued with the presentation by describing what the Streamlined organization does to assist states as they administer a simpler and more uniform sales and use tax system for all sellers and for all type of commerce. Mr. Johnson outlined the goals of the Streamlined organization to create a simpler system for administering the various state and local sales taxes; making systems uniform if they cannot be made simpler; balancing the interests of state and local sovereignty with the simplification and uniformity efforts; and using technology wherever possible to ease the collection and reporting requirements.



Mr. Johnson and Mr. Reynolds discussed the impact of the U.S. Supreme Court 1992 decision in Quill v. North Dakota and physical presence requirements for sales tax collection. Mr. Reynolds responded to task force questions regarding a recent case in South Dakota challenging the Quill decision. Mr. Johnson spoke about the process the Streamlined organization initially went through to identify issues facing businesses across different states. Mr. Reynolds discussed aspects of Colorado's sales tax system that make it more complicated, including separate state and local tax administration, different state and local tax bases, non-uniform definitions between state and local jurisdictions, non-uniform returns, and requiring separate registrations in each jurisdiction.



Mr. Johnson discussed the effort that went into the Streamlined Sales and Use Tax Agreement (SSUTA), which was first passed in 2002 and included state legislators, tax authorities, and the business community. The SSUTA became effective in 2005 when at least 10 states, representing at least 20 percent of the U.S. population, had passed conforming legislation through their state legislatures to join the Streamlined organization. Mr. Johnson explained that Tennessee is considered an associate member because they have passed the required legislation to conform, but the effective date is delayed.



Mr. Johnson described the key features of the SSUTA, including the state level administration of local sales and use taxes, one-stop central registration, single uniform sales tax returns, common state and local tax bases, uniform definitions, the certified service provider model, rate and boundary databases, a taxability matrix that shows what is taxed in each jurisdiction, simplified exemption administration, uniform destination-based sourcing rules, and allowing states to continue to choose to use origin-sourcing for intrastate transactions.



Mr. Johnson continued the presentation with a discussion of the certified service provider (CSP) model and how it works. Mr. Johnson described the services CSPs provide. Mr. Johnson described the various requirements for CSPs and the benefits of using CSPs from a state's perspective.



Mr. Johnson and Mr. Reynolds responded to task force member questions regarding other states' experiences in needing additional staffing at their departments of revenue, the need for an additional up-front investment by the state, and the need for continued participation by state legislators in the Streamlined organization.



Mr. Reynolds discussed the benefits of using CSPs from a seller's perspective. Mr. Johnson discussed how CSPs are compensated. Mr. Johnson discussed the voluntary registration of sellers with Streamlined to collect the member states' sales taxes.



Mr. Johnson and Mr. Reynolds discussed several simplification efforts for Colorado to consider. These include:

  • the central administration of the sales tax system by a single entity, either by the state or by an independent third party, that would handle registration, the filing and processing of returns, accepting and distributing remittances, and the appeals process; and
  • a single entity that handles all audits for the state and local jurisdictions.



Mr. Johnson and Mr. Reynolds responded to task force member questions related to how the audit effectiveness rate of states with a single state audit compare to those states with local audits, how effective the state would be in administering and auditing a sales tax system where there the local jurisdictions have such different tax bases.



Mr. Reynolds discussed the ongoing litigation in South Dakota concerning the Quill decision and the components that the Supreme Court considered in that original decision, including the burden on interstate commerce that would be created by requiring sellers without a physical presence to comply with all of the taxing jurisdictions across the country.



Mr. Johnson and Mr. Reynolds responded to task force member questions related to the potential for having centralized registration and remittance with a de-centralized audit system and issues related to Colorado's unique system. Mr. Johnson suggested talking to the representatives involved in the efforts to simplify Louisiana's sales tax system. Task force member questions continued related to compensation for CSPs, Colorado's vendor fee, ways to adapt the Streamlined model to Colorado's unique system while working to address local concerns, and the availability of each state's taxability matrix online.



Mr. Johnson continued the presentation with additional simplification efforts for Colorado to consider, including:

  • a single location for sellers to register and update their registration;
  • having a uniform return; and
  • having uniform definitions among taxing jurisdictions.



Mr. Johnson and Mr. Reynolds responded to task force member questions related to the status of Streamlined member states prior to joining the organization and the changes they had to make in order to join; what makes Colorado unique relative to those states that are involved in the Streamlined organization; and what makes a state an advisory, but non-conforming state.



Mr. Johnson discussed previously-introduced and pending federal legislation concerning remote seller collection authority, including minimum simplification requirements under the Marketplace Fairness Act and the Remote Transactions Parity Act. Mr. Johnson and Mr. Reynolds responded to task force member questions related to the likelihood of these bills passing Congress.