Streamlined Sales Tax Project (SSTP)

1. Streamlined Sales Tax Project (SSTP) Overview Society for Information Management (SIM) April 13, 2005 Streamlined Sales Tax Project (SSTP)

2. Agenda • SSTP Overview • Wisconsin Legislation • Federal Legislation • Technology • Pending Issues

3. Who’s Involved • 45 States & DC impose sales tax • 42 States & DC involved in SSTP • 21 States enacted conforming legislation • Business community

4. What it does - - Rules • State level administration of local sales and use taxes • Common state and local tax bases within a state after December 31, 2005 • Uniform sourcing rules: destination based

5. What it does - - Rules • Menu of uniform definitions -- legislatures decide what is taxable or exempt • Simplified exemption processing • Rate simplification with databases • No caps and thresholds after December 31, 2005

6. What it does - - Rules • Limited scope audits and certification standards • Joint audits for large, multi-state businesses • Hold harmless provisions if use data bases • Uniform return

7. What it does - - Rules • Sales tax holidays (guidelines and limited defined products) • One rounding rule • Common customer refund procedures • State funding of technology

8. Wisconsin Legislation -- Governor’s Budget Bill • Adopt uniform definitions • Adopt sourcing rules • Adopt exemption administration provisions (e.g., relieve seller from burden of proof)

9. Wisconsin Legislation -- Governor’s Budget Bill • Adopt hold harmless provisions for sellers and providers who uses the state’s taxability matrix and rate/jurisdiction database • Effective October 1, 2005 (interstate agreement on January 1, 2006)

10. Federal Legislation • H.R. 3184 introduced 9-25-03 • S. 1736 introduced 10-15-03 • Authorization to require collection if adopt provisions of Streamlined Sales and Use Tax Agreement • Small business exception • Reasonable seller compensation

11. Technology Implementation • Central registration system • Database matching rate to zip codes • Taxability matrix

12. Technology Implementation • Model 1 - Certified Service Provider (CSP) • Model 2 - Certified Automated System (CAS) • Model 3 - Certification of In-house (Proprietary) System • Continue with system “as is”

13. Model 1 - Certified Service Provider (CSP) • States contract with CSPs • States test and certify CSP’s systems • States compensate CSPs • Retailer selects CSP to perform all sales tax functions • CSP determines tax due, pays the tax to the states, and files the return with the states

14. Model 1 - Certified Service Provider (CSP) • CSP is liable for tax due with two exceptions: • errors by the states • fraud by the retailer • CSP is subject to audit and periodic system checks • Retailer subject to audit on purchases (use tax)

15. Model 2 - Certified Automated Systems (CAS) • Retailer selects CAS from those available • Retailer establishes an interface with CAS • CAS performs calculation of tax due • States compensate retailer for use of CAS

16. Model 2 - Certified Automated Systems (CAS) • Person/company who obtained certification of CAS from states is liable for failure of CAS • Person/company who obtained certification of CAS is not liable for errors by states • Retailer is liable for paying tax due and accuracy of returns

17. Model 2 - Certified Automated Systems (CAS) • CAS subject to periodic system checks • Retailer subject to audit on tax remittance and return filing • Retailer subject to audit on purchases (use tax)

18. Certification of CSPs and CASs by Governing Board • Contract between Governing Board of states and CSPs • Certification of CASs for determining state and local sales and use tax rates, determining whether an item is taxable or exempt, any other requirement set by Governing Board

19. Compensation • Model 1 - Monetary allowance to CSP per contract • Model 2 - All retailers will receive a base rate for a period not to exceed 24 months following commencement of participation by a retailer

20. Compensation • Retailers using Model 1 (CSPs) will not get vendor discounts otherwise provided in state law • Retailers using Model 2 (CAS) will get vendor discounts otherwise provided in state law

21. Time Line - Model 1 Certified Service Providers (CSPs) • Proposals due on 1-3-2005 • Initial approvals 2-15-05 • Certification process completed 8-15-05 • Tentative awards 8-15-05 • Negotiations completed 10-01-05 • Final contracts 10-31-05

22. Time Line - Model 2 Certified Automated Systems (CASs) • Some CSPs will provide CASs • Other CASs will be certified after CSPs certified

23. Pending Issues • Certificates of compliance • Governing Board on July 1, 2005 • Interstate agreement on October 1, 2005 • Voluntary collections begin October 1, 2005

24. Pending Issues • Telecommunication definitions • Bundling rules • Exemption processes • Digital equivalent definitions

25. Contacts www@dor.state.wi.us www@streamlinedsalestax.org dhardt@dor.state.wi.us