Citations Affected: IC 6-2.5.
Synopsis: Sales and use tax administration. Enacts the simplified sales
and use tax administration act. Provides for the appointment of four
delegates to enter into multistate discussions concerning the Simplified
Sales and Use Tax Agreement. Permits the department of state revenue
to enter into the agreement with other states to simplify and modernize
sales and use tax administration in order to substantially reduce the
burden of tax compliance for all sellers and for all types of commerce.
Authorizes the department to act jointly with other states that are
members of the agreement to establish standards for certification of
certified service providers and certified automated systems and to
establish performance standards for multistate sellers. Specifies certain
requirements that must be included in the agreement before the state of
Indiana may enter into the agreement. Includes certain provisions
concerning certified service providers (an agent certified jointly by the
states to perform all of a seller's sales tax functions). Includes certain
provisions concerning certified automated systems (the software
certified jointly by the states to calculate the tax imposed by each
jurisdiction on a transaction, to determine the amount of tax to remit to
the appropriate state, and to maintain a record of the transaction).
Specifies that no provision of the agreement invalidates or amends any
provision of Indiana law.
Effective: July 1, 2001.
January 11, 2001, read first time and referred to Committee on Finance.
February 15, 2001, amended, reported favorably _ Do Pass.
A BILL FOR AN ACT to amend the Indiana Code concerning
SECTION 1. IC 6-2.5-11 IS ADDED TO THE INDIANA CODE
AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2001]:
Chapter 11. Simplified Sales and Use Tax Administration Act
Sec. 1. This chapter shall be known as and referred to as the "simplified sales and use tax administration act".
Sec. 2. As used in this chapter:
(1) "Agreement" means the Streamlined Sales and Use Tax Agreement.
(2) "Certified automated system" means software certified jointly by the states that are signatories to the agreement to calculate the tax imposed by each jurisdiction on a transaction, to determine the amount of tax to remit to the appropriate state, and to maintain a record of the transaction.
(3) "Certified service provider" means an agent certified jointly by the states that are signatories to the agreement to perform all of the seller's sales tax functions.
(4) "Person" means an individual, a trust, an estate, a fiduciary, a partnership, a limited liability company, a limited liability partnership, a corporation, or any other legal entity.
(5) "Sales tax" means the state gross retail tax levied under IC 6-2.5.
(6) "Seller" means any person making sales, leases, or rentals of personal property or services.
(7) "State" means any state of the United States and the District of Columbia.
(8) "Use tax" means the use tax levied under IC 6-2.5.
Sec. 3. The general assembly finds that a simplified sales and use tax system will reduce and over time eliminate the burden and cost for all vendors to collect this state's sales and use tax. The general assembly further finds that this state should participate in multistate discussions to review, amend, or review and amend the terms of the agreement to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance for all sellers and all types of commerce.
Sec. 4. (a) For the purposes of reviewing, amending, or reviewing and amending the agreement embodying the simplification requirements set forth in section 7 of this chapter, the state shall enter into multistate discussions. For purposes of those discussions, the state shall be represented by four (4) delegates, appointed as follows:
(1) One (1) member of the house of representatives, appointed by the speaker of the house of representatives.
(2) One (1) member of the senate, appointed by the president pro tempore of the senate.
(3) One (1) individual appointed by the governor.
(4) The commissioner of the department of state revenue, who is an ex officio member.
A delegate appointed under subdivisions (1) through (3) serves at the pleasure of the officer who appointed that delegate.
(b) Each delegate who is not a state employee is entitled to the minimum salary per diem provided by IC 4-10-11-2.1(b). The delegate is also entitled to reimbursement for traveling expenses as provided under IC 4-13-1-4 and other expenses actually incurred in connection with the delegate's duties as provided in the state policies and procedures established by the Indiana department of administration and approved by the budget agency. Expenses incurred under this subsection shall be paid out of the funds appropriated to the department of commerce or the civil rights
(c) Each delegate who is a state employee but who is not a member of the general assembly is entitled to reimbursement for traveling expenses as provided under IC 4-13-1-4 and other expenses actually incurred in connection with the delegate's duties as provided in the state policies and procedures established by the Indiana department of administration and approved by the budget agency.
(d) Each delegate who is a member of the general assembly is entitled to receive the per diem, mileage, and travel allowances paid to members of the general assembly under travel policies established by the legislative council. Per diem, mileage, and travel allowances paid under this subsection shall be paid from appropriations made to the legislative council or the legislative services agency.
Sec. 5. The department may enter into the agreement with one (1) or more states to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance for all sellers and for all types of commerce. In furtherance of the agreement, the department may act jointly with other states that are members of the agreement to establish standards for certification of certified service providers and certified automated systems and to establish performance standards for multistate sellers. The department may take other actions reasonably required to implement this chapter. Other actions authorized by this section include, but are not limited to, the adoption of rules and the joint procurement, with other member states, of goods and services in furtherance of the cooperative agreement. The department or the department's designee shall represent the state of Indiana before the other states that are signatories to the agreement.
Sec. 6. No provision of the agreement authorized by this chapter in whole or in part invalidates or amends any provision of the law of Indiana. Adoption of the agreement by the state of Indiana does not amend or modify any Indiana law. Implementation of any condition of the agreement in Indiana, whether adopted before, at, or after membership of this state in the agreement, must be by the action of this state.
Sec. 7. The department shall not enter into the agreement unless the agreement requires each state to abide by the following requirements:
(1) Simplified State Rate. The agreement must set restrictions
to limit over time the number of state rates.
(2) Uniform Standards. The agreement must establish uniform standards for the following:
(A) The sourcing of transactions to taxing jurisdictions.
(B) The administration of exempt sales.
(C) Sales and use tax returns and remittances.
(3) Central Registration. The agreement must provide a central electronic registration system that allows a seller to register to collect and remit sales and use taxes for all signatory states.
(4) No Nexus Attribution. The agreement must provide that registration with the central registration system and the collection of sales and use taxes in the signatory states will not be used as a factor in determining whether the seller has nexus with a state for any tax.
(5) Local Sales and Use Taxes. The agreement must provide for reduction of the burdens of complying with local sales and use taxes through the following:
(A) Restricting variances between the state and local tax bases.
(B) Requiring states to administer any sales and use taxes levied by local jurisdictions within the state so that sellers collecting and remitting these taxes will not have to register or file returns with, remit funds to, or be subject to independent audits from local taxing jurisdictions.
(C) Restricting the frequency of changes in the local sales and use tax rates and setting effective dates for the application of local jurisdictional boundary changes to local sales and use taxes.
(D) Providing notice of changes in local sales and use tax rates and of changes in the boundaries of local taxing jurisdictions.
(6) Monetary Allowances. The agreement must outline any monetary allowances that are to be provided by the states to sellers or certified service providers. The agreement must allow for a joint public and private sector study of the compliance cost on sellers and certified service providers to collect sales and use taxes for state and local governments under various levels of complexity to be completed on or before July 1, 2002.
(7) State Compliance. The agreement must require each state to certify compliance with the terms of the agreement before
joining and to maintain compliance, under the laws of the
member state, with all provisions of the agreement while the
state is a member.
(8) Consumer Privacy. The agreement must require each state to adopt a uniform policy for certified service providers that protects the privacy of consumers and maintains the confidentiality of tax information.
(9) Advisory Councils. The agreement must provide for the appointment of an advisory council of private sector representatives and an advisory council of nonmember state representatives to consult in the administration of the agreement.
Sec. 8. The agreement authorized by this chapter is an accord among individual cooperating sovereign states in furtherance of their governmental functions. The agreement provides a mechanism among the member states to establish and maintain a cooperative, simplified system for the application and administration of sales and use taxes under the duly adopted law of each member state.
Sec. 9. (a) The agreement authorized by this chapter binds and inures only to the benefit of the state of Indiana and the other member states. No person, other than a member state, is an intended beneficiary of the agreement. Any benefit to a person other than a state is established by the law of the state of Indiana and the other member states and not by the terms of the agreement.
(b) Consistent with subsection (a), no person shall have any cause of action or defense under the agreement or by virtue of the state of Indiana's approval of the agreement. No person may challenge, in any action brought under any provision of law, any action or inaction by any department, agency, or other instrumentality of the state of Indiana, or any political subdivision of the state of Indiana on the grounds that the action or inaction is inconsistent with the agreement.
(c) No law of Indiana, or the application thereof, may be declared invalid as to any person or circumstance on the grounds that the provision or application is inconsistent with the agreement.
Sec. 10. (a) A certified service provider is the agent of a seller, with whom the certified service provider has contracted, for the collection and remittance of sales and use taxes. As the seller's agent, the certified service provider is liable for sales and use tax due each member state on all sales transactions it processes for the
seller except as set out in this section. A seller that contracts with
a certified service provider is not liable to the state for sales or use
tax due on transactions processed by the certified service provider
unless the seller misrepresented the type of items it sells or
committed fraud. In the absence of probable cause to believe that
the seller has committed fraud or made a material
misrepresentation, the seller is not subject to audit on the
transactions processed by the certified service provider. A seller is
subject to audit for transactions not processed by the certified
service provider. The member states acting jointly may perform a
system check of the seller and review the seller's procedures to
determine if the certified service provider's system is functioning
properly and the extent to which the seller's transactions are being
processed by the certified service provider.
(b) A person that provides a certified automated system is responsible for the proper functioning of that system and is liable to the state for underpayments of tax attributable to errors in the functioning of the certified automated system. A seller that uses a certified automated system remains responsible and is liable to the state for reporting and remitting tax.
(c) A seller that has a proprietary system for determining the amount of tax due on transactions and has signed an agreement establishing a performance standard for that system is liable for the failure of the system to meet the performance standard.