Transcript WORK SESSION ON COMPENSATION

WORK SESSION ON
COMPENSATION
WHAT’S IN AM9003
AND THE FEDERAL
BILL?
Purpose of AM9003
Amendment
• Define standards for reasonable
compensation
• Conform to the expected language of
the federal bill, the Mainstreet
Fairness Act
REQUIREMENT FOR
COLLECTION AUTHORITY
• PROVIDE VENDOR COMPENSATION TO
ALL SELLERS
• STATES THAT DON’T COMPENSATE
CAN STILL BE MEMBERS
• MUST HAVE 10 STATES, 20% OF
POPULATION TO KEEP COLLECTION
AUTHORITY
Why all sellers?
Why not just remote sellers?
How Collection Authority
Granted after Congress Acts
• Six month waiting period for all
• Create Compensation Review Board
– 11 members from SLAC, BAC, Gov. Bd.
– CRIC chair ex officio
– Review each state’s compensation petition;
recommend certification
– Perform annual reviews of state plans
• Governing Board Certifies Annually
If Compensation is
Challenged
• Any person may petition the Governing
Board for a review of a state’s compliance
• Handled under Section 1002 of the
Agreement
• Use rules and procedures in Section 1001
for Issue Resolution
• After a final determination, the petitioner
has 60 days to appeal to Court of Claims
…the penalty for non-compliance with compensation
mandates
Loss of Collection
Authority!
Part I Compensation
• All sellers receive compensation for the
credit and debit card fees paid to
unrelated entities on the sales tax portion
of the sale.
– Can be a credit on the monthly return
– Can be a formula that approximates the amount
due
– Cannot be capped
– JCCS said its about 0.64% of tax remitted
Should this language be
broadened in the SSUTA
to include other forms of
electronic payment
charges or fees?
Paypal, e-checks, etc.
How would formulas work?
State A
State B
State C
Total
Total Sales
$100,000
$100,000
$100,000
$300,000
Total Tax
$7,942
$2,000
$9,942
Total
$107,942
$100,000
$102,000
$309,942
Apportion
34.83%
32.26%
33.91%
100%
Total card
Fees/state
$697
$645
$658
$2,000
compensation
$51
$13
$64
0
0
Part II Compensation
•
Reasonable compensation for other
related costs of collecting taxes.
– Can vary by state, size of seller,
complexity of state laws
– Can be capped
– Can be adjusted in relation to
size of small business exemption
Some issues for States to discuss…
• Should compensation be uniform for
all states?
• How difficult is it for CSP’s &
Retailers if there are differences
between states?
Some issues for States to discuss
• Should smaller sellers be paid more if
their costs are higher?
– How much extra? How defined?
• Should remote sellers be paid more
than instate sellers?
• Should remote sellers receive 100%
of their costs?
Some issues for States to discuss
• What is a reasonable cap?
• How do you avoid “winners and losers”
if the state’s compensation is
changed?
• What is a reasonable amount of the
new money to spend on compensation?
Some issues for States to discuss
• How do you structure compensation to
reflect the complexities of states?
–
–
–
–
Local jurisdictions (few or many?)
2nd rate on groceries/drugs?
Origin sourcing?
Caps/threshholds?
• Do you provide additional compensation
only to sellers that are affected?
Some issues for states to discuss….
• States must accept a SER to get
collection authority (not all do this now)
• Should we compensate a late-filed
return?
• Should sellers using CSP’s also get
compensation?
Some issues for states to discuss…
• Compensation for remote sellers
begins immediately; but until
collections grow to equal the amount
due in compensation, in-state
compensation may be delayed. (This
is the “trigger”—will it work?)
• States will have to track collections.
Small Seller Exemption
• Total gross annual dollar volume of
remote sales nationwide of the
remote seller and its affiliates
• Calculate for Oct. 1 to Sept. 30;
start collecting on Jan. 1
Small Seller Exemption
• Any seller utilizing a 3rd party for
hosting its sales and processing
payments shall not be entitled to the
small seller exemption if the dollar
volume of sales for all sellers using
the host exceeds the threshhold.
How Big or Small?
Exemption
Revenue Foregone
Average
Economy
Fox
$25,000
n/a
20.1%
n/a
$100,000
17.5%
31.9%
3.1%
$250,000
26.1%
39.7%
12.3%
$500,000
33.1%
45.6%
20.6%
$1 million
40.8%
51.6%
30.0%
$5 million
51.1%
65.3%
36.9%
What is Cost of Compliance
for small retailers?
• One estimate placed the breakeven
sales level (at 6.5% sales taxes) at
about $53,077 for a state.
• This means it is not cost effective to
collect their taxes if they remit less
than this “breakeven” amount.
• Can you estimate for your state?
And the Small Seller
Exemption is…
$xxx, 000
Thinking ahead…
• What if we paid remote sellers who
volunteer the same as CSP’s if they
would collect for us?
• And, we gave them amnesty for the
first year when they joined?
• What if we developed a single point
of collection for the SER’s so small
retailers file returns in one place?
Thinking ahead…
• What if states could pay voluntary
remote sellers now at state option
• What if we develop technology to
include our rates and boundaries data
bases in online shoping carts and
make it FREE to retailers?
• What if we adopt a single rate/state
for volunteer remote sellers to use?
Future Directions?
•More, cheaper technology
•More focused compensation
•Work on federal legislation while
paying volunteer sellers to collect