1 Streamlined Sales Tax Governing Board

The Marketplace Fairness Act of 2015(MFA) Grants state and local jurisdictions the right to require the collection of sales and use taxes by sellers with no in-state physical presence (“remote seller”) Two options: Streamlined option (180 days): State publication of notice of intent to exercise authority Full membership in the Streamlined Sales and Use Tax Agreement Alternate option (6 months): Legislative identification of the sales and use taxes to which authority applies Legislative identification of the products and services to which authority shall not apply Adoption of federal minimum simplifications 2

Federal Minimum Simplifications – MFA – Alternate Path State and local sales and use tax simplifications required: Central administration of tax for remote sellers Single audit for all state and local taxing jurisdictions within a state for remote sellers Single return for remote sellers Limitations on return filing frequency for remote sellers Uniform state and local tax base Uniform sourcing rules for remote sellers Certain liability relief for remote sellers and certified software providers 3

Federal Minimum Simplifications – MFA – Alternate Path State must provide: Taxability and exemption information Rates and boundary database Free software Certification procedures for “certified software providers” Remote sellers can use a certified software provider of their choice. 90 days notice for state and local tax rate changes 4

Small Seller Exception – MFA Sellers with $1.0 million or less in gross annual receipts in total remote sales in the U.S. in the prior calendar year (small sellers) are not subject to the collection requirement. Remote sales of related persons are aggregated for purposes of determining small seller exception. 5

What the MFA Does NOT Do Create nexus or alter standards for determining nexus Encourage adoption of any new taxes by the states Subject sellers to non-sales or use tax types (i.e., business and occupation taxes, income taxes, etc.) Permit or prohibit states from licensing or regulating persons, requiring any person to qualify to transact interstate business, subjecting any person to taxes unrelated to products and services, or exercising authority over matters of interstate commerce. Affect intrastate sales; or Change the sourcing for products covered by the Mobile Telecommunications Sourcing Act, 4 U.S.C (2002) 6

Limitation on Initial Collection Authority State cannot exercise authority: Until the date that is 1 year after the date of enactment AND Between October 1 and December 31 of the first calendar year beginning after the date of enactment 7

Definitions Certified software provider Locality Member State Person Remote Sale Remote Seller Sourced State Streamlined Sales and Use Tax Agreement 8

Federal Preemption Does not preempt or limit any power exercised or to be exercised by a State or local jurisdiction under the law of such state or under any other federal law 9

Status of MFA Legislation Introduced in Senate on March 10,

11 Questions on MFA?

Remote Transactions Parity Act Similarities and Differences Between RTPA and MFA 12

The Remote Transactions Parity Act of 2015 (RTPA) – Discussion Draft Provides states with the exact same two options for gaining remote seller collection authority as the MFA Includes the minimum simplification requirements contained in the MFA, plus additional protections for remote sellers and certified software providers. 13

The Remote Transactions Parity Act of 2015 (RTPA) – Discussion Draft Additional provisions: If a remote seller uses a certified software provider, audits must go through that provider and not the seller Remote sellers with less than $5M of gross receipts in the taxable year may not be audited, except in cases of fraud 3 year statute of limitations for assessments The state must provide a taxability and exemption table The state must provide a database showing rates and boundaries 14

The Remote Transactions Parity Act of 2015 (RTPA) – Discussion Draft Additional provisions: Free access to national CSPs whose software can: Determine correct rate based on sourcing rules Calculate tax due at time of sale Generate and file returns electronically Remit the taxes to the States electronically Report all transactions processed to the remote seller Respond to audit requests by the states Safeguards and protection of consumer privacy 15

The Remote Transactions Parity Act of 2015 (RTPA) – Discussion Draft Additional provisions: Free access includes: Installation Set-up Maintenance Must be capable of calculating and filing in all states qualified under RTPA 16

The Remote Transactions Parity Act of 2015(RTPA) – Discussion Draft Additional provisions: State must provide: Certification procedures for “certified software providers” State may delegate certification to others but must retain final approval over certification decisions State cannot deny certification arbitrarily or capriciously State must complete certification by first day of calendar quarter at least 180 days after request for certification State must certify multiple national CSPs State must compensate CSPs for their services Remote sellers can use a certified software provider of their choice. 17

The Remote Transactions Parity Act of 2015(RTPA) – Discussion Draft Additional provisions: Certain liability relief for remote sellers and certified software providers For remote seller if CSP makes error For CSP if incorrect information from remote seller For both if incorrect information provided by state For both if purchaser provides necessary exemption information to claim exemption within 90 days of sale For both if 90 days notice for changes to taxability and exemption information and state and local tax rate changes not provided as long as collecting at immediately preceding rates 18

The Remote Transactions Parity Act of 2015(RTPA) – Discussion Draft Additional provisions: Accept registrations from central online registration system at no charge to seller or CSP State must compensate remote sellers no less than the amount, if any, it provides to nonremote sellers 19

The Remote Transactions Parity Act of 2015(RTPA) – Discussion Draft Additional provisions: Small Seller Exception For first year - remote sellers with $10 million or less in gross annual receipts in the prior calendar year (small sellers) are not subject to the collection requirement. For second year - $5 million For third and subsequent - $1 million 20

The Remote Transactions Parity Act of 2015(RTPA) – Discussion Draft Additional provisions: Remote Seller – person who makes remote sales in a state without having “physical presence” Physical presence – business activities in a state which include any of the following in the taxable year: Individual physically in the state or assigning one or more employees to be in the state Using services of an agent to establish or maintain market (exclusive requirement) Owning/leasing tangible personal property or real property in the state Does NOT include presence in the state for less than 15 days or presence to conduct limited or transient business activity 21

Dispute Resolution District courts of the United States have original and exclusive jurisdiction over suits in equity and actions at law to determine compliance with the RTPA. 22

Federal Preemption Except as provided in the RTPA, no state shall enact or enforce any law, etc. requiring remote sellers to collect tax. The RTPA is construed to preempt and limit any conflicting power exercised or to be exercised by a State or local jurisdiction under the law of such state or local jurisdiction 23

Status of RTPA This is only a discussion draft – nothing has been formally introduced. 24

Remote Transactions Parity Act Questions on RTPA? 25