Government Finance Officers Association

Transcription

1 UTA H CHAPTER Government Finance Officers Association

2 Agenda Sales & Telecom Tax Update Sales Online Distribution Access (SODA) - Retrieving Monthly Distribution Data Tax Equalization & Reduction Act HB 441 (Broadening the sales tax base) Wayfair vs. South Dakota Local Sales Tax Revenue Highlights Local Sales Tax Revenue Highlights, Charts, and Graphs Sales Tax & Telecommunication Tax Update & Trends Tax Equalization & Reduction Act (Expanding the Sales Tax Base to Services) Impacts of South Dakota vs. Wayfair and Online Sales Tax NEW Tool for Local Governments to Research & Resolve Issues (SODA)

3 Local Sales Tax Revenue Highlights, Charts, and Graphs WHY IS HAPPENING WITH S A L E S TA X R E VENUES?

4 Take Any Word From The Dictionary, Alter It By Adding, Subtracting, Or Changing One Letter, And Supply A New Definition. Intaxication: Euphoria at getting a tax refund, which lasts until you realize it was your money to start with. Bozone (n.): The substance surrounding stupid people that stops bright ideas from penetrating. The bozone layer, unfortunately, shows little sign of breaking down in the near future. Decafalon (n.): The grueling event of getting through the day consuming only things that are good for you.

5 Local Sales & Other Local Taxes - UGFOA FY16 to FY19* 1,000, , , , , , , , , , % Growth 6.6% Growth 529,880 GFFY16, 670, % Growth (in thousands) 9.5% Growth 556,603 GFFY17, 734, % Growth 602, % Growth GFFY18, 804, % Growth 638,544 GFFY16 GFFY17 GFFY18 GFFY19 Local Sales Other Local Average Linear (Local Sales) Linear (Other Local) 11.4% Growth GFFY19, 896,113 * UGFOA Fiscal Year is from April to March The Other Local column shows additional taxes due on certain types of transactions subject to sales and use tax and includes: Transient Room Municipality Transient Room Impacted Communities (New) Tourism, Recreation, Cultural, Convention, & Airport Facilities County Option Funding for Botanical, Cultural, Recreational, & Zoological Organizations Funding for Health Care County Option Motor Vehicle Rental Town Option City or Town Option Funding for Botanical, Cultural, Recreational, & Zoological Organizations City or Town Option Sales & Use Local Sales for Tax Transportation

6 Comparison of Local Sales & Other Sales Tax Distributions (in thousands) Transient Room Municipality Transient Room Impacted Communities (New) Tourism, Recreation, Cultural, Convention, & Airport Facilities County Option Funding for Botanical, Cultural, Recreational, & Zoological Organizations Funding for Health Care County Option Motor Vehicle Rental Town Option City or Town Option Funding for Botanical, Cultural, Recreational, & Zoo City or Town Option Sales & Use Local Sales for Tax Transportation 3.2% Total Growth 11.4% Other Growth 9.1% Total Growth UGFOA Fiscal Year* 2011 to % Other Growth 2.9% Local Growth 6.0% Local Growth *April to March

7 Comparison of Local Sales & Other Sales Tax (Continued) (in thousands) 54.8% 58.4% For comparison, in GFFY04, 47.2% Other 52.8% Local 45.2% 41.6% UGFOA Fiscal Year* 2011 to 2019 *April to March

8 UGFOA Fiscal Year* 2018 to 2019 *April to March

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10 Telecom Taxes WHY IS MY T E L E COM D I S T RIBUTION FA L L I NG?

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13 Thousands 3,500 3,000 Muni Telecom vs. E911 Monthly Distributions 2,500 2,000 1,500 1, Audit Refund July Muni Telecom Linear (911) Linear (Muni Telecom)

14 Thousands 3,500 E911 Lines Reported by Filing Period 3,000 2,500 2,000 1,500 1, Land Lines Radio Lines Total Linear (Land Lines) Linear (Radio Lines) Linear (Total)

15 Telecommunication Service Costs How much are you paying for phone service today? Land Cell How much were you paying for phone service Five years ago? Ten years ago?

16 Unlimited Talk, Text and Data Monthly Plan Comparisons Verizon $120 $80 Sprint $110 $50 Knutson, K. (2017, June 23). The New Sticker Shock: Plunging Cellphone Bills. The Wall Street Journal

17 CPI All telephone and wireless telephone services All Telephone Cellular Land Line Linear (All Telephone) Linear (Cellular) Linear (Land Line)

18 CPI vs. Distribution All Telephone Mtel Dist Linear (All Telephone) Linear (Mtel Dist)

19 Tax Equalization and Reduction Act WHY DOES T HE G OVERNOR WA NT TO E X PA ND T HE S A L E S TAX B A SE I NTO T HE SERVICE BASED ECONOMY?

20 Take Any Word From The Dictionary, Alter It By Adding, Subtracting, Or Changing One Letter, And Supply A New Definition. Cashtration (n.): The act of buying a house, which renders the subject financially impotent for an indefinite period of time. Giraffiti: Vandalism spray-painted very, very high. Gastroentomologist: The doctor to visit if you have butterflies in your stomach.

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28 How The Wayfair Decision Is Playing Out In The U.S. & Utah Market I T HAS BEEN NEARLY A Y E A R S I NCE T HE U. S. S U PREME COURT R E NDERED ITS HISTORIC DECISION IN T HE SOUTH D A KOTA V. WAYFA I R I NC. CASE A ND TA X PAY ERS A R E S T I L L G R A PPLING WITH ITS I MPLICATIONS.

29 Take Any Word From The Dictionary, Alter It By Adding, Subtracting, Or Changing One Letter, And Supply A New Definition. Sneezure (snee-zhur) n. A fit of several sneezes in a row. Mouse Arrest Forbidden use of the computer. Drainchild Not all brainchildren ideas work well so we need a word for a bright idea that drains resources without benefit. New Word Snoralator n. An easier word to pronounce and remember than CPAP, a breathing device that prevents snoring and sleep apnea.

30 Quill Corp. v. North Dakota, 504 U.S. 298 (1992) At issue, North Dakota, similar to its sales tax, imposed a use tax on property purchased for storage, use, or consumption in the state. It basically imposed the collection obligation on every retailer that made regular or systematic solicitations in the state. For its part, Quill argued that North Dakota had no power to make it collect the tax. In Quill, there were two competing legal theories: the Due Process Clause and the Commerce Clause. Due Process is concerned with whether the person s activities with a State are substantial enough to justify the State s exercise of jurisdiction or power over him. In the end, it s a fairness concern. The Commerce Clause, of course, allows Congress to regulate commerce among the several States, i.e., interstate commerce. The Commerce Clause says, states can t take actions that unduly interfere or burden interstate commerce. So, as of 1992, the Supreme Court through its decisions in Quill (and Bellas Hess) - had a bright-line rule requiring physical presence, due to the Commerce Clause, for imposing sales or use tax collection obligations on retailers.

31 South Dakota v. Wayfair, Inc. et al. (2018) Jumping to the conclusion, in Wayfair, the Supreme Court held that Quill is flawed on its own terms. The majority opinion, written by Justice Kennedy, advanced three reasons: First, the physical presence rule is not a necessary interpretation of the requirement that a state tax must be applied to an activity with a substantial nexus with the taxing State. Second, Quill creates rather than resolves market distortions. And third, Quill imposes the sort of arbitrary, formalistic distinction that the Court s modern Commerce Clause precedents disavow. (citation omitted) Thus, the Court concluded that, that the physical presence rule of Quill is unsound and incorrect. Chief Justice Roberts and Justices Breyer, Sotomayor, and Kagan dissented. In a nutshell, the dissent argued that Congress not the Court should resolve the physical presence issue.

32 Utah s Legislative Response To South Dakota v. Wayfair Special Session held on July 18, 2018: Senate Bill 2001 requires an out-of-state seller to collect and remit Utah sales and use taxes if in the previous or current calendar year that seller: Receives gross revenue from the sale of tangible personal property, any product transferred electronically, or services for storage, use, or consumption in the state of more than $100,000; or Sells tangible personal property, products transferred electronically, or services for storage, use, or consumption in the state in 200 or more separate transactions. These thresholds echo those in South Dakota Senate Bill 106. The requirements of SB 2001 are effective for sales on or after 1/1/2019. Note: SB 2001 also repeals the 18 percent seller discount Utah offered remote sellers who voluntarily collected and paid Utah sales tax. The repeal is effective for sales occurring on or after Jan. 1, 2019.

33 NEW Tool for Local Governments to Access Distribution Data S A L E S O NLINE D I S T R IBUTION ACCESS

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36 2019 Enrolled Bill Summary HB 495 Tax Restructuring and Equalization Task Force Rep. Mike Schultz (Effective March 29, 2019) Creates the Tax Restructuring and Equalization Task Force comprised of ten legislators appointed by the President/Speaker, and four non-legislative, non-voting members appointed by the President/Speaker taking into consideration recommendations by the governor and taxation expertise of a potential appointee; requires the task force to study state and local revenue systems with the purpose of making recommendations to address structural imbalances among revenue sources; requires a progress report to the first Revenue and Taxation Interim Committee and Executive Appropriations Committee after June 1, 2019; requires a report of study recommendations to the first Revenue and Taxation Interim Committee and Executive Appropriations Committee after August 1, 2019; and sunsets the task force on June 30, 2020.

37 2019 Enrolled Bill Summary SB 168 Sales and Use Tax Revisions Sen. Curtis S. Bramble (Effective October 1, 2019) Defines marketplace, marketplace facilitator, and marketplace seller; provides the circumstances under which a marketplace facilitator or a marketplace seller is subject to the payment or collection and remittance requirements of the Sales and Use Tax Act; amends the definition of seller to include a marketplace facilitator; requires the marketplace facilitator to determine nexus separately for direct sales and facilitated sales; if a marketplace facilitator has physical presence in the state, the marketplace facilitator has nexus on all direct sales; if a marketplace facilitator does not have physical presence, the marketplace facilitator has nexus on all direct sales if the marketplace facilitator conducts 200 or more direct transactions or more than $100,000 in direct sales; a marketplace facilitator, regardless of physical presence, has nexus on all facilitated sales if the marketplace facilitator conducts 200 or more facilitated transactions or more than $100,000 in facilitated sales; a marketplace facilitator must segregate, in its books and records, direct and facilitated sales separately and is subject to audit on both direct sales and the sales it facilitates; a marketplace seller shall only report direct sales if the marketplace seller has nexus; a marketplace seller shall not report and is not subject to audit on facilitated sales; a marketplace facilitator must begin collecting on the first day of a calendar quarter that is at least 60 days after meeting the nexus threshold; purchasers must seek refunds of overcollected tax through the marketplace facilitator; and provides relief for marketplace facilitator errors on a phased-in basis (7% error rate through 2020, 5% error rate through 2021, and 3% error rate through 2022).

38 The effort that became the Streamlined Sales Tax Governing Board began in March The goal of this effort is to find solutions for the complexity in state sales tax systems that resulted in the U.S. Supreme Court holding (Bellas Hess v. Illinois and Quill Corp. v. North Dakota) that a state may not require a seller that does not have physical presence in the state to collect tax on sales into the state. The Court ruled that the existing system was too complicated to impose on a business that did not have a physical presence in the state. The Court said Congress has the authority to allow states to require remote sellers to collect tax. The result of this work is the Streamlined Sales and Use Tax Agreement. The purpose of the Agreement is to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance. The Agreement focuses on improving sales and use tax administration systems for all sellers and for all types of commerce through all of the following: 1. State level administration of sales and use tax collections. 2. Uniformity in the state and local tax bases. 3. Uniformity of major tax base definitions. 4. Central, electronic registration system for all member states. 5. Simplification of state and local tax rates. 6. Uniform sourcing rules for all taxable transactions. 7. Simplified administration of exemptions. 8. Simplified tax returns. 9. Simplification of tax remittances. 10. Protection of consumer privacy. Today twenty-four states have adopted the simplification measures in the Agreement (representing over 31 percent of the population) and more states are moving to adopt the simplification measures.