House Introduced Bill 5080

HOUSE BILL No. 5080

September 20, 2001, Introduced by Reps. Allen, Howell, Gilbert, Koetje, Vear, DeVuyst and Mortimer and referred to the Committee on
Commerce.

A bill to provide for a streamlined system of sales and use

tax collection; to prescribe the requirements necessary for this

state to adopt a multistate agreement; to provide for a board

with certain powers and duties; to provide for the registration

of sellers who select a model of collection and remittance; to

forgive liability of collection of sales and use taxes on past

transactions for certain sellers; to assure privacy of buyers; to

prescribe certain powers and duties of state departments; and to

repeal acts and parts of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

1
Sec. 1. (1) This act shall be known and may be cited as the

2
"equitable sales and use tax administration act".

3
(2) This act shall at no time create or implement a new tax

4
on interstate electronic commerce.

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Sec. 2. As used in this act:

2
(a) "Agreement" means the streamlined sales and use tax

3
agreement.

4
(b) "Board" means the board of governance created in section

5
5 or the board's designee.

6
(c) "Certified automated system" means computer software

7
certified jointly by the states that are signatories to the

8
agreement to calculate the tax imposed by each jurisdiction on a

9
transaction, determine the amount of tax to remit to the appro-

10
priate state, and maintain a record of the transaction.

11
(d) "Certified service provider" means an agent certified

12
jointly by the states that are signatories to the agreement to

13
perform all of the seller's sales and use tax functions, other

14
than the seller's obligation to remit tax on its own purchases.

15
(e) "Department" means the department of treasury.

16
(f) "Person" means an individual, trust, estate, fiduciary,

17
partnership, limited liability company, limited liability part-

18
nership, corporation, or any other legal entity.

19
(g) "Purchaser" means a person to whom a sale of tangible

20
personal property is made or to whom a service is furnished.

21
(h) "Sales tax" means the tax levied under the general sales

22
tax act, 1933 PA 167, MCL 205.51 to 205.78.

23
(i) "Seller" means any person who sells, leases, or rents

24
tangible personal property or services to another person.

25
(j) "Signatory state" means a state that has entered into

26
the agreement.

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1
(k) "Sourcing" means determining the tax situs of a

2
transaction.

3
(l) "State" means any state of the United States or the

4
District of Columbia.

5
(m) "Use tax" means the tax levied under the use tax act,

6
1937 PA 94, MCL 205.91 to 205.111.

7
Sec. 3. This act is not intended to generate revenue that

8
is not currently due under the sales and use tax acts but is

9
intended to provide for simplification of the method of collect-

10
ing the sales and use taxes that is currently authorized to be

11
collected under those acts. Nothing in this act shall be con-

12
strued to expand the tax base of the sales tax or use tax or to

13
eliminate exemptions, but rather, this act simplifies and modern-

14
izes the sales tax and use tax administration in order to sub-

15
stantially reduce the burden of tax compliance for all sellers

16
and for all types of commerce.

17
Sec. 4. The payment, collection, and remittance of the

18
sales and use taxes under this act are subject to the provisions

19
of the general sales tax act, 1933 PA 167, MCL 205.51 to 205.78,

20
and the use tax act, 1937 PA 94, MCL 205.91 to 205.111.

21
Sec. 5. (1) There is created a board of governance consist-

22
ing of the following members:

23
(a) The majority leader of the senate or his or her designee

24
who is a member or former member of the senate or an employee of

25
the senate or the senate fiscal agency.

26
(b) The speaker of the house of representatives or his or

27
her designee who is a member or former member of the house of

05198'01 * 4

1
representatives or an employee of the house of representatives or

2
the house fiscal agency.

3
(c) The minority leader of the senate or his or her designee

4
who is a member or former member of the senate or an employee of

5
the senate or the senate fiscal agency.

6
(d) The minority leader of the house of representatives or

7
his or her designee who is a member or former member of the house

8
of representatives or an employee of the house of representatives

9
or the house fiscal agency.

10
(e) The state treasurer or his or her designee.

11
(f) One member appointed by the state treasurer.

12
(g) The governor or his or her designee.

13
(h) One member appointed by the governor.

14
(2) The board may represent this state in all meetings that

15
are limited to only those states that are also authorized by

16
statute to enter into a streamlined sales and use tax agreement.

17
The board shall vote on behalf of this state and represents the

18
position of this state in all matters relating to the adoption of

19
the agreement or amendment of the agreement.

20
(3) The board shall report quarterly to the committees

21
responsible for reviewing tax issues in the senate and the house

22
of representatives on the board's progress in negotiating the

23
agreement and recommend what state statutes are required to be

24
amended to be substantially in compliance with the agreement.

25
(4) A business advisory council is created to advise and

26
make recommendations to the board. The council shall consist of

27
6 members appointed as follows:

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1
(a) The governor shall appoint 2 members who are retail

2
sellers domiciled in this state.

3
(b) The governor shall appoint 2 members who are large

4
national retail sellers domiciled outside of this state but who

5
are licensed to do business in this state.

6
(c) After the members are appointed under subdivisions (a)

7
and (b), those members shall elect 1 retail seller domiciled in

8
this state and 1 manufacturer domiciled in this state.

9
Sec. 6. (1) The department shall not enter into the agree-

10
ment until legislation substantially complying with the require-

11
ments of the agreement is enacted into law.

12
(2) The department shall not enter into the agreement unless

13
the agreement requires each signatory state to abide by the fol-

14
lowing requirements:

15
(a) The agreement shall set restrictions to achieve more

16
uniform state rates through the following:

17
(i) Limiting the number of state rates.

18
(ii) Eliminating caps on the amount of state tax that is due

19
on a transaction.

20
(iii) Eliminating thresholds on the application of state

21
tax.

22
(b) The agreement shall establish uniform standards for the

23
following:

24
(i) The sourcing of transactions to taxing jurisdictions.

25
(ii) The administration of exempt sales.

26
(iii) The allowances a seller can take for bad debts.

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1
(iv) Sales and use tax returns and remittances.

2
(c) The agreement shall require signatory states to develop

3
and adopt uniform definitions of sales and use tax terms. The

4
definitions shall enable a signatory state to preserve its abil-

5
ity to make policy choices that are substantially consistent with

6
the uniform definitions.

7
(d) The agreement shall provide a central electronic regis-

8
tration system that allows a seller to register to collect and

9
remit sales and use taxes for all signatory states.

10
(e) The agreement shall provide that registration with the

11
central registration system and the collection of sales and use

12
taxes in the signatory states will not be used as a factor in

13
determining whether the seller has nexus with a state for any

14
tax.

15
(f) The agreement shall provide for reduction of the burdens

16
of complying with local sales and use taxes through the

17
following:

18
(i) Restricting and eliminating variances between each sig-

19
natory state's tax base and the local tax bases within that

20
state.

21
(ii) Requiring signatory states to administer any sales and

22
use taxes levied by local jurisdictions within the state so that

23
sellers collecting and remitting these taxes will not have to

24
register or file returns with, remit funds to, or be subject to

25
independent audits from local taxing jurisdictions.

26
(iii) Restricting the frequency of changes in the local

27
sales and use tax rates and setting effective dates for the

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1
application of local jurisdictional boundary changes to local

2
sales and use taxes.

3
(iv) Providing notice of changes in local sales and use tax

4
rates and of changes in the boundaries of local taxing

5
jurisdictions.

6
(g) The agreement shall outline any monetary allowances that

7
are to be provided by the signatory states to sellers or certi-

8
fied service providers.

9
(h) The agreement shall require each signatory state to cer-

10
tify compliance with the terms of the agreement before joining

11
and to maintain compliance under the laws of the member state

12
with all provisions of the agreement while a member.

13
(i) The agreement shall require each signatory state to

14
adopt a uniform policy for certified service providers that pro-

15
tects the privacy of consumers and maintains the confidentiality

16
of tax information.

17
(j) The agreement shall provide for the appointment of an

18
advisory council of private sector representatives and an

19
advisory council of nonmember state representatives to consult

20
with the signatory states in the administration of the

21
agreement.

22
Sec. 7. The department with the approval of the board and

23
subject to section 6 shall enter into the streamlined sales and

24
use tax agreement with 1 or more states to simplify and modernize

25
sales and use tax administration in order to substantially reduce

26
the burden of tax compliance for all sellers and for all types of

27
commerce. The department may act jointly with other signatory

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1
states of the agreement to establish standards for certification

2
of a certified service provider and certified automated system

3
and to establish performance standards for multistate sellers.

4
The department may also take other actions reasonably required to

5
implement the provisions of this act. Other actions authorized

6
by this section include, but are not limited to, the promulgation

7
of rules and regulations and the joint procurement, with other

8
member states, of goods and services in furtherance of the coop-

9
erative agreement. Implementation of any condition of the agree-

10
ment in this state, regardless of when implemented, must be by

11
the action of this state.

12
Sec. 8. (1) Any provision of the agreement or any applica-

13
tion of a provision of the agreement to any person or circum-

14
stance that is inconsistent with any law of this state shall not

15
have effect.

16
(2) Nothing in this act shall be construed to amend or

17
modify any law of this state or to limit the authority of the

18
Michigan legislature. The agreement authorized by this act binds

19
and inures only to the benefit of this state and the other signa-

20
tory states. No person, other than a signatory state, is an

21
intended beneficiary of the agreement. Any benefit to a person

22
other than a signatory state is established by the law of this

23
state and the other signatory states and not by the terms of the

24
agreement.

25
(3) Nothing in this act shall be construed to limit the

26
authority of the courts in this state. A person has all the

27
rights and remedies provided for in 1941 PA 122, MCL 205.1 to

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1
205.31. A person does not have any cause of action or defense

2
under the agreement because of this state's approval of the

3
agreement or on the ground that the department's action or inac-

4
tion is inconsistent with the agreement.

5
(4) A law of this state, or the application of a law, may

6
not be declared invalid as to any person or circumstance on the

7
ground that the provision or application is inconsistent with the

8
agreement.

9
(5) No provision of the agreement authorized by this act in

10
whole or in part invalidates or amends any provision of the law

11
of this state. Adoption of the agreement by this state does not

12
amend or modify any law of this state.

13
Sec. 9. (1) A person may participate under this act only by

14
registering in the central registration system provided for by

15
the agreement.

16
(2) The department shall participate in an online registra-

17
tion system with other signatory states that allows sellers to

18
register online.

19
(3) A seller registered under the agreement in this state is

20
considered registered in each of the signatory states. A seller

21
registered under the agreement in any other signatory state is

22
considered registered in this state. A seller may also choose to

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register directly with other signatory states.

24
(4) A seller may cancel its registration under the agreement

25
at any time according to the agreement. However, a seller who

26
cancels its registration remains liable for remitting taxes

27
collected to the appropriate states.

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(5) By registering under this section, the seller agrees to

2
collect and remit sales and use taxes according to the agreement

3
for taxable sales in all signatory states including states that

4
adopt the agreement after the seller registers.

5
(6) Registration of a person under the agreement and collec-

6
tion of sales and use taxes by that person in signatory states

7
does not provide nexus with any signatory state and shall not be

8
used as a factor in determining nexus with a signatory state for

9
any tax purpose.

10
Sec. 10. A seller registered under section 9 shall agree to

11
1 of the following models for purposes of collecting and remit-

12
ting sales and use taxes under the agreement:

13
(a) Model 1. A seller that has contracted with a certified

14
service provider to act as its agent to perform all of the

15
seller's sales and use tax collection functions other than the

16
seller's obligation to remit sales or use tax on its own

17
purchases.

18
(b) Model 2. A seller that has selected a certified auto-

19
mated system to perform part of the seller's sales and use tax

20
collection functions, but retains responsibility for remitting

21
the tax.

22
(c) Model 3. A seller that has sales in at least 5 signa-

23
tory states, has total annual sales of $500,000,000.00 or more,

24
has a proprietary system that calculates the amount of tax due in

25
each taxing jurisdiction, and has entered into a performance

26
agreement with the signatory states establishing a tax

27
performance standard for the seller. As used in this

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1
subdivision, a seller includes an affiliated group of sellers

2
using the same proprietary system.

3
Sec. 11. (1) In computing the amount of tax remitted to

4
this state, a certified service provider under model 1 in section

5
10(a) and a seller under model 2 in section 10(b) may deduct a

6
base rate that applies to taxable transactions processed through

7
the certified automated system of the certified service provider

8
under model 1 or of the seller under model 2, in accordance with

9
the terms of the contract entered into by the signatory states.

10
A model 2 seller under section 10(b) who takes the deduction

11
under this subsection, or a seller who contracted with a certi-

12
fied service provider to act as its agent under model 1 in sec-

13
tion 10(a), shall not take a deduction under section 4 of the

14
general sales tax act, 1933 PA 167, MCL 205.54, or section 4f of

15
the use tax act, 1937 PA 94, MCL 205.94f.

16
(2) In computing the amount of tax remitted to this state, a

17
seller under model 3 in section 10(c) may only take the deduction

18
provided for in section 4 of the general sales tax act, 1933

19
PA 167, MCL 205.54, or section 4f of the use tax act, 1937 PA 94,

20
MCL 205.94f.

21
(3) In addition to the deduction under subsection (1) or

22
(2), whichever is applicable, for the period not to exceed 24

23
months following the voluntary seller's registration under sec-

24
tion 9, a voluntary seller may also deduct a percentage of tax

25
revenue generated in this state by the voluntary seller in

26
accordance with the terms of the contract entered into by the

27
signatory states. As used in this subsection, "voluntary seller"

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1
means a seller that is not required to register to collect the

2
tax for this state.

3
Sec. 12. (1) A certified service provider is the agent of a

4
seller, with whom the certified service provider has contracted

5
for the collection and remittance of sales and use taxes. As the

6
seller's agent, the certified service provider is liable for

7
sales and use tax due each signatory state on all sales transac-

8
tions it processes for the seller except as provided in this

9
section. A seller that contracts with a certified service pro-

10
vider is not liable to this state for sales or use tax due on

11
transactions processed by the certified service provider unless

12
the seller makes a material misrepresentation of the type of

13
items it sells or committed fraud. In the absence of probable

14
cause to believe that the seller has committed fraud or made a

15
material misrepresentation, the seller is not subject to audit on

16
the transactions processed by the certified service provider. A

17
seller is subject to audit for transactions not processed by the

18
certified service provider. The signatory states acting jointly

19
may perform a system check of the seller and review the seller's

20
procedures to determine if the certified service provider's

21
system is functioning properly and the extent to which the

22
seller's transactions are being processed by the certified serv-

23
ice provider.

24
(2) A person that provides a certified automated system is

25
responsible for the proper functioning of that system and is

26
liable to this state for underpayments of tax attributable to

27
errors in the functioning of the certified automated system. A

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1
seller that uses a certified automated system remains responsible

2
and is liable to this state for reporting and remitting tax.

3
(3) A seller that has a proprietary system for determining

4
the amount of tax due on transactions and has signed an agreement

5
establishing a performance standard for that system is liable for

6
the failure of the system to meet the performance standard.

7
Sec. 13. (1) Except as provided in subsection (3), a certi-

8
fied service provider shall not retain or disclose the personally

9
identifiable information of consumers. A certified service

10
provider's system shall be designed and tested to assure the pri-

11
vacy of consumers by protecting their anonymity.

12
(2) A certified service provider shall provide clear and

13
conspicuous notice of its information practices to consumers,

14
including, but not limited to, what information it collects, how

15
it collects the information, how it uses the information, and

16
whether it discloses the information to signatory states.

17
(3) A certified service provider's retention or disclosure

18
to signatory states of personally identifiable information is

19
limited to exemption claims because of a consumer's status or

20
intended use of the goods or services purchased, to investiga-

21
tions of fraud, and to the extent necessary to ensure the reli-

22
ability of the certified service provider's technology.

23
(4) A certified service provider shall provide the necessary

24
technical, physical, and administrative safeguards to protect

25
personally identifiable information from unauthorized access and

26
disclosure.

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1
(5) This privacy policy is subject to enforcement by

2
signatory states' attorneys general or other appropriate

3
authorities.

4
(6) If personally identifiable information is retained for

5
the purpose of subsection (3), in the absence of exigent circum-

6
stances, a person shall be provided with reasonable notification

7
of that retention and afforded reasonable access to their own

8
data, with a right to correct inaccurately recorded data.

9
(7) The agreement does not enlarge or limit a signatory

10
state's authority to do any of the following:

11
(a) Conduct audits or other review pursuant to section 12 as

12
provided under this agreement and state law.

13
(b) Provide records pursuant to a signatory state's freedom

14
of information act, disclosure laws with governmental agencies,

15
or other regulations.

16
(c) Prevent, consistent with state law, disclosures of con-

17
fidential taxpayer information.

18
(d) Prevent, consistent with federal law, disclosures or

19
misuse of federal return information obtained under a disclosure

20
agreement with the internal revenue service.

21
(e) Collect, disclose, disseminate, or otherwise use anony-

22
mous data for governmental purposes.

23
(8) As used in this section, "personally identifiable

24
information" means information that identifies a specific

25
person.

26
Sec. 14. (1) A person who registers as a seller under

27
section 9 is not liable for any uncollected or nonremitted sales

05198'01 * 15

1
or use tax on transactions with purchasers in this state before

2
the date of registration if the seller was not licensed under the

3
sales or use tax act in this state in the 12-month period preced-

4
ing the date this state entered into the agreement. The seller

5
is also not responsible for any penalty or interest that may be

6
due on those transactions.

7
(2) Subsection (1) does not apply to the following:

8
(a) Any tax liability of the registered seller for transac-

9
tions that are subject to sales or use tax in this state in which

10
the registered seller is the purchaser.

11
(b) Any sales or use taxes already paid or remitted to this

12
state.

13
(c) Any transactions for which the seller received notice of

14
the commencement of an audit and the audit is not finally

15
resolved, including related administrative or judicial

16
processes.

17
(3) Subsection (1) applies to the seller absent the seller's

18
fraud or intentional misrepresentation of a material fact if the

19
seller continues to be registered under section 9 and continues

20
collection and remittance of applicable sales and use taxes in

21
this state for at least 36 months. The statute of limitations

22
applicable to assessing a tax liability is tolled during this

23
36-month period.

24
Sec. 15. (1) The department, acting jointly with the signa-

25
tory states, may certify a person as a certified service provider

26
if the person meets all of the following requirements:

05198'01 * 16

1
(a) The person uses a certified automated system.

2
(b) The person integrates its certified automated system

3
with the system of a seller for whom the person collects tax so

4
that the tax due on a sale is determined at the time of the

5
sale.

6
(c) The person agrees to remit the taxes it collects at the

7
time and in the manner specified by the signatory states.

8
(d) The person agrees to file returns on behalf of the sell-

9
ers for whom it collects tax.

10
(e) The person agrees to protect the privacy of tax informa-

11
tion it obtains.

12
(f) The person enters into a contract with the signatory

13
states and agrees to comply with the terms of the contract.

14
(2) The department, acting jointly with the signatory

15
states, may certify a software program as a certified automated

16
system if the signatory states determine that the program meets

17
all of the following requirements:

18
(a) It identifies the applicable state and local sales and

19
use tax rate for a transaction based on the uniform sourcing pro-

20
vision established under the agreement.

21
(b) It identifies whether or not an item is exempt from

22
tax.

23
(c) It identifies the amount of tax to be remitted for each

24
taxpayer for a reporting period.

25
(d) It can generate reports and returns as required by the

26
signatory states.

05198'01 * 17

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(e) It can meet any other requirement set by the signatory

2
states.

3
(3) The department, acting jointly with the signatory

4
states, may establish 1 or more sales tax performance standards

5
for multistate sellers that meet the eligibility criteria set by

6
the signatory states and that have developed a proprietary system

7
to determine the amount of sales and use tax due on

8
transactions.

9
Sec. 16. The committees responsible for reviewing tax

10
issues in the senate and the house of representatives shall

11
review the revenue reports produced by the senate and house

12
fiscal agencies and consider methods to return to the taxpayers

13
revenues from enhanced use tax compliance as a result of this

14
act.

15
Sec. 17. This act is repealed effective December 31, 2002.

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