Streamlined Sales Tax Advisory Council

March 18, 2005, Meeting Minutes

I. Opening Comments

Mike Ralston opened the meeting by introducing Jeff Aten from the Department, who is working on certified service provider evaluations.

II. Update from National Meeting in Atlanta

A newly-developed concept called the “Associate Membership” has been introduced as a way for states that have not achieved substantial conformance with the Agreement to become members of the Governing Board. These states have passed legislation to bring their sales tax system into partial conformance, but still have some issues. An e-mail from Stephen Kranz’s was distributed to the Council. The two-tiered associate membership concept would keep the project moving and therefore put the Governing Board in place by October 1, 2005, and allow the agreement to be implemented.

Kristi discussed the risks to the associate membership However, standard definitions and implementation of CSP would be pluses. All agree we need to do something to keep the project moving. If the Governing Board gets in place, then the Certified Service Providers can get certified thus getting the software issues resolved.

Associate members would have limited rights on the Governing Board. They cannot vote on states for conformance, amendments to the Agreement, or interpretation of the Agreement. However, they would count toward the 10-states/20% population required for implementation of the Agreement.

Lucy Hardy brought up Section 423.11. She’s not sure Iowa can go the associate membership route. The Department will need to discuss whether or not legislation is needed. The Director has authority to enter into an Agreement. Whether a specific change in the Agreement requires specific change to the Iowa law will need to be determined.

Steve Roberts made the motion that the Council support the concept of the Associate Membership as presented at this Advisory Council meeting subject to the approval of a law change if needed. Kristi Magill seconded and the motion carried.

Mike asked the Council for the authority to finish the 2004 Report to the Legislature. The report will include a paragraph regarding the associate membership concept. Steve Roberts made a motion that the Council give authority to Mike Ralston and Kristi Magill to finish the report. Jim Henter seconded and the Council approved.

Federal legislation is going to be introduced for a mandatory system. The discussion of sending a letter to Senator Grassley mentioning the two issues the Council is concerned with needs to be addressed. The two issues being small business exemption is important to Iowa and the CSP requirement of who incurs the cost of implementation. It was determined that we would wait until the bill is introduced, then send a letter from the co-chairs with our concerns and offer to sit down to discuss with the Senator and his staff. The letter would also offer to appear at any hearing of the federal bill. A copy of that letter should go to Dave Brasher and Steve Wood. Other states have some issues with various provisions of the Federal Legislation.

Certified Services Provider RFP - Jeff Aten discussed the awarding of CSP contracts. Scott Peterson’s e-mail dated March 14, 2005, will be forwarded to the Council. The Conforming States Committee drafted and distributed a request for proposals seeking companies interested in having states review and potentially certify their software product. Seven companies have been selected to be the first to go through the state certification process. They are: Avalara, EDS – U.S. Government Solutions, Exactor, Inc., Paychex, Inc., Sales Tax Services, Salis, and Taxware, LP. Scott will be communicating with these contractors. Some have software already written; others we don’t know the status of their software. Hopefully by late summer, the Governing Board will have these seven companies certified.

Taxpayer Business Advisory Council (BAC) - There’s a proposed amendment which amends the Agreement to say, “the Governing Board shall recognize and call it Business Advisory Council.” Kristi’s still has concerns pertaining to the membership of this Council that it will be representing all sizes of business.

States are concerned about multiple BAC’s being formed. Who do you recognize? It’s a legitimate concern.

Central Registration System - Registration roll out is June 6, 2005. SST piece went out for bid. MTC is the back up. Rod’s take is that they do have a satisfactory private vendor.

Tax Rate Databases – vendor databases – if can be certified. Rod supports seeing movement to vendor databases. The Department receives quarterly updates for our database. We rejected the last one. Rod discussed with the vendor in Atlanta. Need to resolve issue of what’s satisfactory. 90% accurate? 95%? 98%? We will never achieve 100%.

Implementing States to vote on Amendments in D.C. April 16, 2005 - We’ve received notification of 16 proposed amendments to the Agreement. Implementing States delegates will be voting on these amendments on April 16, 2005 in Washington, DC.

The list of amendments is below and how the Department delegate will vote is noted in bold.

1) Motion to amend Section 305 of the Agreement

Offered by Stephen Kranz of Washington, D.C. - Issue Vendor Database

Iowa will vote yes

2) Motion to amend Section 305 and 307 of the Agreement

Offered by Washington – only provide an address based rates and boundary database

Iowa will vote no

3) Motion to amend Section 309 of the Agreement

Offered by Tennessee – extend timeframes to conform to sourcing rules

Goes away with Associate Membership

4) Motion to amend Section 312 of the Agreement

Offered by Stephen Kranz of Washington, D.C. – not limit to delivered electronically

Iowa will vote yes

5) Motion to amend Section 312 of the Agreement to add a new subsection E

Offered by Stephen Kranz of Washington, D.C.

Iowa is waiting pending finalization. Without final language Revenue vote is no & Businesses vote is Yes. We will inform the Advisory Council via e-mail if the amendment issues are resolved.

6) Motion to amend Section 317 (A)(5) of the Agreement

Offered by Stephen Kranz of Washington, D.C.

Issue: I.D. # on exemption certificate. Currently not an issue for Iowa.

Iowa will vote yes.

7) Motion to amend Section 317 of the Agreement to add new paragraph section 317(A)(8)

Offered by Stephen Kranz of Washington, D.C.

Iowa will vote yes

8) Motion to amend Section 330 of the Agreement

Offered by William Wilkins of Ohio – small business exemption from sourcing rules

Goes away with Associate Membership

9) Motion to amend Article VI of the Agreement

Offered by Senator Dwight Cook, North Dakota - each member state payment of CSP

Iowa will vote no

10) Motion to amend Section 702 of the Agreement

Offered by Gary Viken of South Dakota – allow states to count towards implementation even though conforming legislation is not effective yet.

Iowa will vote no

11) Motion to amend Section 807 of the Agreement

Offered by Gary Viken of South Dakota - Procedural thing – Litigation on Governing Board

Iowa will vote yes

12) Motion to amend Section 811 of the Agreement

Offered by Commissioner Jerry Johnson of Oklahoma – recognize rather than create a Business Advisory Council

Iowa will vote yes

13) Motion to amend Library of Definitions in Appendix C, Part I to delete subsection 6(F)

Offered by Stephen Kranz of Washington, D.C.

Issue: Bundling. This will change. Originally said no but we will go with negotiated change.

14) Motion to adopt the definition of Bundled Transaction

Offered by Stephen Kranz of Washington, D.C.

Same as bundling – We’ll go with negotiated change.

15) Motion to adopt telecommunications related definitions in Part II, Product Definitions

Offered by Stephen Kranz of Washington, D.C. - Issue: Telecommunications

Iowa will go with negotiated change.

16) Motion to amend Section 801 of the Agreement

Offered by Minnesota – to extend time to amend medical definitions

Iowa will vote no.

Iowa will vote yes to the Associate Membership concept.

Casey also distributed the issue paper and proposed amendment on Buydowns, Manufacturers’ Coupons, Store Coupons. Iowa already follows agreement reached with States and Businesses.

Petition for Certification – Feedback from States and businesses. 30 days for public comments and then we have 15 days to respond.

III. Legislative Proposal

Dave Casey discussed the Legislative changes. Division I are changes as results of SST Legislation changes.

Division II – Business feedback – differences in basis for state and local tax bases on 1) Hotel/Motel and 2) Special Construction Machinery & Equipment. Can’t have these in the Agreement so a new excise tax was created.

This legislation should bring us into conformance and take care of unintended consequences by our last legislation.

The Council discussed the need for retroactive provisions on some sections of the bill and these provisions were added to the final bill language. Don will follow-up with Susan Haffield on business feedback.

Stacey mentioned that Representative Sands and Senator McKibben are not receiving meeting notices. If the Legislative delegates are going to April 16, 2005 meeting, the Council needs to provide input. Mike will arrange a meeting to update.

IV. Rule Changes

Intended to make legislative change by Administrative Rule changes.

Third Draft distributed via e-mail. Comments are due within the next two weeks. Hopefully filing date will be three weeks from today (April 8, 2005).

Buydown – changes the definition of selling process. Dave thinks we’re right on point. Our law already covers these items with the exception to the last example on use tax on used cars. However, the department will follow this example and allow the amount.

V. Sourcing

Dick Koberg wanted this on the agenda. He wanted to raise it to the Council to go back on sourcing. Mike had indicated that we can’t go back. A Bill has been filed that will take Iowa out of conformance but unlikely to pass.

VI. Set Next Meeting

Scheduled the next meeting to be held Monday, April 25, 2005, at the Hoover State Office Building from 10:00 a.m. to Noon.

VII. Adjournment

Mike thanked everyone for being great about their time. Kristi agreed. The meeting was adjourned.