Iowa Department of Revenue Streamlined Sales Tax Advisory Council Minutes

Iowa Streamlined Sales Tax Advisory Council Meeting Minutes

October 9, 2006

Hoover State Office Building

Present: Jay Turner, Steve Roberts, Ross Larson, Stacey Johnson , Andy Warren, Kristi Magill, Marc Michaelsen, Jerry Fleagle, Mark Schuling, Dave Casey, Larry Paxton, Jeff Aten, Darwin Clupper. Ann Stocker attended by telephone.

I. Welcome, Introductions & Opening Comments

Mark Schuling and Kristi Magill opened the meeting at 10:05 a.m. by welcoming everyone. Two new members were introduced: Andy Warren from NFIB/Iowa and Ross Larson from Colorfx.

II. Update on Meetings in Bismarck

A. Business Advisory Council

Kristi updated the Council on the BAC meeting in Bismarck which was also attended by Stacey Johnson, who is also on the National Business Advisory Council Board of Directors. The BAC discussed the importance of defining digital goods separate from tangible personal property. The issue needs more work, and the BAC needs to come up with a definition. Progress was made on the purchaser equality issue. It was discussed that penalty, interest and tax relief would be given to purchasers who rely on data base information. A purchaser relying on the taxability matrix would receive penalty relief. The BAC will discuss these issues again at their next meeting.

B. Implementing States

Dave gave an update on the Implementing States meeting. Bruce Johnson of Utah was head of the Implementing States. Now that the Governing Board has been implemented established, the Implementing States group will be going away. There are now three groups that are a part of the Governing Board:

1) Member states ( full voting rights)

2) Associate States (some voting rights)

3) Advisor States (no voting rights)

There are 15 full member states (the newest two are Vermont & Rhode Island) and 6 associate member states. There are 45 states with sales tax (about half are members of Streamlined in one form).

C. Governing Board

Dave gave a Governing Board update. The Governing Board went through the yearly recertification exercise to be sure everyone is in conformance. Every State (with the exception of New Jersey ) was recertified. Iowa was recertified and found to be in compliance.

1. Advisor States

Dave stated there are currently 22 states participating as Advisor States.

2. Liability Relief for Purchasers

Dave stated a penalty, interest and tax provision passed but he does not have a copy of the final version. It provides liability relief for the purchaser. It was a heavily debated topic and several states were opposed to it in the beginning.

3. New Member States

Dave stated the two new member states are Vermont & Rhode Island. They are members effective January 1, 2007. There are now 15 full member states.

4. Digital Products

The use of digital products was referred to the SLAC for further review and discussion. The department will propose legislation to impose the tax on specific items that are now downloaded either electronically or digitally. It would impose a tax on all music, video and books for personal use. Currently, if these items are downloaded electronically or digitally, tax is not paid. The concept will be to create a level playing field on the sale of music, videos and books.

5. Multiple Points of Use (MPU)

This issue was also referred to the SLAC group to review. The goal was to get the issue resolved at the Columbus meeting, but that didn't happen. The big issue is computer software used in multiple states and where it gets taxed.

6. Other Business in Bismarck

Iowa 's dues for next year were set at $28,000. The President and Vice-President remain unchanged, thereby providing some continuancy with those who are involved in the Governing Board .

D. State and Local Advisory Council (SLAC)

Larry gave an update of the SLAC meeting in Columbus. Issues discussed at the meeting were:

1. Issue paper and rules - to be presented at the upcoming Seattle meeting.

2. Definition of fur clothing was discussed. More discussion at next the meeting.

3. Digital property. Moving cautiously on the definition.

4. Bundling discussion. One issue is the deminimus test.

5. MPU discussion. This is not a major issue in Iowa.

Larry felt the meeting was productive and a number of issues were moved forward.

III. Analysis Required by Iowa State Legislature Regarding Impact on Iowa Businesses

Mark explained that new legislation requires the Iowa Department of Revenue Director and the Council to provide recommendations to address the new administrative burden identified in the Council's 2005 report by January 1, 2007. When Iowa went from origin to destination sourcing, retailers had to report differently and it created an additional burden on some the retailers. The department will attempt to segregate retailers affected by additional filing jurisdictions and type of business. Dave will lead a sub-committee of Stacey, Kristi, Ross, Jay, Marc and Jim, to come up with a recommendation to present to the full Council in December. The sub-committee will meet by conference call to discuss recommendations.

IV. Update on Legislation & Rules

Dave stated that legislation may be needed relating to liability to purchasers and said it would could be a part of the department's policy bill. Stacey made a recommendation that this issue be a stand alone bill. It was agreed that it would be a separate bill.

The department is currently drafting streamlined sales tax rules. All of the old rules are being updated and past references are being removed.

Dave stated Mark had sent an email to the Iowa Governing Board delegates suggesting a meeting by conference call to discuss and reach a consensus on issues and amendments to the agreement before the next Governing Board meeting in December.

V. Update on Registration and Revenue Tracking

Larry gave an update on registration and revenue tracking. Currently, there are:

1,049 registrants on the Streamlined project

216 are model 1 (use CSP's)

113 are model 2 (use certified automated system)

720 are model 4 (calculate own taxes and submit in paper form by mail)

Most model 4's registered because of amnesty, which ran out on September 30th .

Collection figures for FY ending June 30 is $2,845,000. $4 million is projected for FY07.

VI. Next National Meeting

A. SLAC – will meet before the Governing Board meeting in Seattle in December.

B. Governing Board – will meet December 11-14 in Seattle. BAC will also meet.

1. Excise Tax - Kristi stated this issue will be watched and scrutinized closely.

VII. Next Advisory Council Meeting

The next meeting will be set for sometime early December. Proposed dates will be sent out by email within the next few days.