[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 34 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                 S. 34

   To promote simplification and fairness in the administration and 
                   collection of sales and use taxes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 22, 2007

   Mr. Enzi introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
   To promote simplification and fairness in the administration and 
                   collection of sales and use taxes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Sales Tax Fairness and 
Simplification Act''.

SEC. 2. CONSENT OF CONGRESS.

    The Congress consents to the Streamlined Sales and Use Tax 
Agreement.

SEC. 3. SENSE OF THE CONGRESS.

    (a) Sales and Use Tax System.--It is the sense of the Congress that 
the sales and use tax system established by the Streamlined Sales and 
Use Tax Agreement, to the extent that it meets the minimum 
simplification requirements of section 7, provides sufficient 
simplification and uniformity to warrant Federal authorization to 
Member States that are parties to the Agreement to require remote 
sellers, subject to the conditions provided in this Act, to collect and 
remit the sales and use taxes of such Member States and of local taxing 
jurisdictions of such Member States.
    (b) Purpose.--The purpose of this Act is to--
            (1) effectuate the limited authority granted to Member 
        States under the Streamlined Sales and Use Tax Agreement; and
            (2) not grant additional authority unrelated to the 
        accomplishment of the purpose described in paragraph (1).

SEC. 4. AUTHORIZATION TO REQUIRE COLLECTION OF SALES AND USE TAXES.

    (a) Grant of Authority.--
            (1) In general.--Each Member State under the Streamlined 
        Sales and Use Tax Agreement is authorized, subject to the 
        requirements of this section, to require all sellers not 
        qualifying for the small business exception provided under 
        subsection (d) to collect and remit sales and use taxes with 
        respect to remote sales sourced to that Member State under the 
        Agreement.
            (2) Requirements for authority.--The authorization provided 
        under paragraph (1) shall be granted once all of the following 
        have occurred:
                    (A) 10 States comprising at least 20 percent of the 
                total population of all States imposing a sales tax, as 
                determined by the 2000 Federal census, have petitioned 
                for membership and have become Member States under the 
                Agreement.
                    (B) The following necessary operational aspects of 
                the Agreement have been implemented by the Governing 
                Board:
                            (i) Provider and system certification.
                            (ii) Setting of monetary allowance by 
                        contract with providers.
                            (iii) Implementation of an on-line 
                        multistate registration system.
                            (iv) Adoption of a standard form for 
                        claiming exemptions electronically.
                            (v) Establishment of advisory councils.
                            (vi) Promulgation of rules and procedures 
                        for dispute resolution.
                            (vii) Promulgation of rules and procedures 
                        for audits.
                            (viii) Provisions for funding and staffing 
                        the Governing Board.
                    (C) Each Member State has met the requirements to 
                provide and maintain the databases and the taxability 
                matrix described in the Agreement, pursuant to 
                requirements of the Governing Board.
            (3) Limitation of authority.--The authorization provided 
        under paragraph (1)--
                    (A) shall be granted notwithstanding any other 
                provision of law; and
                    (B) is dependent upon the Agreement, as amended, 
                meeting the minimum simplification requirements of 
                section 7.
    (b) Termination of Authority.--
            (1) In general.--The authorization provided under 
        subsection (a) shall terminate for all States if--
                    (A) the requirements contained in subsection (a) 
                cease to be satisfied; or
                    (B) any amendment adopted to the Agreement after 
                the date of enactment of this Act is not within the 
                scope of the administration of sales and use taxes or 
                taxes on telecommunications services by the Member 
                States.
            (2) Loss of member state status.--The authorization 
        provided under subsection (a) shall terminate for a Member 
        State, if such Member State no longer meets the requirements 
        for Member State status under the terms of the Agreement.
    (c) Determination of Status.--
            (1) In general.--The Governing Board shall determine if 
        Member States are in compliance with the requirements of 
        subsections (a) and (b).
            (2) Compliance determination.--Upon the determination of 
        the Governing Board that all the requirements of subsection (a) 
        have been satisfied, the authority of each Member State to 
        require a seller to collect and remit sales and use taxes shall 
        commence on the first day of a calendar quarter at least 6 
        months after the date the Governing Board makes its 
        determination.
    (d) Small Business Exception.--No seller shall be subject to a 
requirement of any State to collect and remit sales and use taxes with 
respect to a remote sale if--
            (1) the seller and its affiliates collectively had gross 
        remote taxable sales nationwide of less than $5,000,000 in the 
        calendar year preceding the date of such sale; or
            (2) the seller and its affiliates collectively meet the 
        $5,000,000 threshold of this subsection, but the seller has 
        less than $100,000 in gross remote taxable sales nationwide.

SEC. 5. TRIBAL GOVERNMENTS.

    (a) Status as Member State.--
            (1) In general.--Any federally recognized Indian Tribe that 
        imposes a generally applicable sales tax may, if such Tribe 
        complies with the terms of this Act--
                    (A) petition to become a Member State under the 
                Agreement; and
                    (B) exercise the authority provided under section 
                4.
            (2) Decision of the governing board.--
                    (A) In general.--If the effect of any federally 
                recognized Indian Tribe's law, rules, regulations, and 
                policies is compliant with each of the terms of the 
                Agreement, and the Indian Tribe has entered an 
                agreement with the primary State where it is located, 
                the Governing Board shall consider such Tribe for 
                admission as a Member State to the Agreement on the 
                same basis as States.
                    (B) No state-tribal agreement present.--If a 
                petitioning Indian Tribe and the primary State in which 
                it is located have attempted to negotiate, but have not 
                reached, an agreement as described in subparagraph (A) 
                within 2 years after the date of the submission of such 
                petition, the Governing Board shall consider such Tribe 
                for admission as a Member State to the Agreement on the 
                same basis as States without regard to the presence of 
                a State-tribal agreement.
            (3) Membership on the governing board.--
                    (A) In general.--If any federally recognized Indian 
                Tribes are accorded Member State status under the 
                Agreement under this section, those Tribes shall be 
                represented on the Governing Board by at least 1 
                member.
                    (B) Multiple tribes.--If 2 or more federally 
                recognized Indian Tribes are accorded Member State 
                status under the Agreement under this section, 
                additional representation of such Tribes on the 
                Governing Board shall be determined by the Governing 
                Board, in consultation with those Tribes that are 
                Member States.
    (b) Rule of Construction.--Nothing in this Act or the Agreement 
shall be construed as--
            (1) diminishing an Indian Tribe's sovereignty or 
        characterizing an Indian Tribe as a State for other purposes;
            (2) affecting existing tax agreements between Indian Tribal 
        Governments and States;
            (3) preventing Indian Tribal Governments and States from 
        entering into bilateral agreements for the collection and 
        allocation of sales taxes (whether or not such bodies are 
        admitted as Member States to the Agreement); or
            (4) overriding established principles of Federal law 
        governing--
                    (A) the taxing jurisdiction of Indian Tribal 
                Governments; and
                    (B) the immunities of Indian Tribal Governments and 
                their members from State taxation with respect to on-
                reservation transactions.

SEC. 6. DETERMINATIONS BY GOVERNING BOARD AND JUDICIAL REVIEW OF SUCH 
              DETERMINATIONS.

    (a) Petition.--At any time after the Governing Board has made the 
determination required under section 4(c)(2), any person who may be 
affected by the Agreement may petition the Governing Board for a 
determination on any issue relating to the implementation of the 
Agreement.
    (b) Review in Court of Federal Claims.--Any person who submits a 
petition under subsection (a) may bring an action against the Governing 
Board in the United States Court of Federal Claims for judicial review 
of the action of the Governing Board on that petition if--
            (1) the petition relates to an issue of whether--
                    (A) a Member State has satisfied or continues to 
                satisfy the requirements for Member State status under 
                the Agreement;
                    (B) the Governing Board has performed a 
                nondiscretionary duty of the Governing Board under the 
                Agreement;
                    (C) the Agreement continues to satisfy the minimum 
                simplification requirements set forth in section 7; or
                    (D) any other requirement of section 4 has been 
                satisfied; and
            (2) the petition is denied by the Governing Board in whole 
        or in part with respect to that issue, or the Governing Board 
        fails to act on the petition with respect to that issue not 
        later than 6 months after the date on which the petition is 
        submitted.
    (c) Timing of Action for Review.--An action for review under this 
section shall be initiated not later than 60 days after the denial of 
the petition by the Governing Board, or, if the Governing Board failed 
to act on the petition, not later than 60 days after the end of the 6-
month period beginning on the day after the date on which the petition 
was submitted.
    (d) Standard of Review.--
            (1) In general.--In any action for review under this 
        section, the court shall set aside the actions, findings, and 
        conclusions of the Governing Board found to be arbitrary, 
        capricious, an abuse of discretion, or otherwise not in 
        accordance with law.
            (2) Remand.--If the court sets aside any action, finding, 
        or conclusion of the Governing Board under paragraph (1), the 
        court shall remand the case to the Governing Board for further 
        action consistent with the decision of the court.
    (e) Jurisdiction.--
            (1) Generally.--Chapter 91 of title 28, United States Code, 
        is amended by adding at the end the following:
``Sec. 1510. Jurisdiction regarding the Streamlined Sales and Use Tax 
              Agreement
    ``The United States Court of Federal Claims shall have exclusive 
jurisdiction over actions for judicial review of determinations of the 
Governing Board of the Streamlined Sales and Use Tax Agreement under 
the terms and conditions provided in section 5 of the Sales Tax 
Fairness and Simplification Act.''.
            (2) Conforming amendment to table of sections.--The table 
        of sections at the beginning of chapter 91 of title 28, United 
        States Code, is amended by adding at the end the following new 
        item:

``1510. Jurisdiction regarding the streamlined sales and use tax 
                            agreement.''.

SEC. 7. MINIMUM SIMPLIFICATION REQUIREMENTS.

    (a) In General.--The minimum simplification requirements for the 
Agreement, which shall relate to the conduct of Member States under the 
Agreement and to the administration and supervision of such conduct, 
are as follows:
            (1) A centralized, one-stop, multistate registration system 
        that a seller may elect to use to register with the Member 
        States, provided a seller may also elect to register directly 
        with a Member State, and further provided that privacy and 
        confidentiality controls shall be placed on the multistate 
        registration system so that it may not be used for any purpose 
        other than the administration of sales and use taxes. 
        Furthermore, no taxing authority within a Member State or a 
        Member State that has withdrawn or been expelled from the 
        Agreement may use registration with the centralized 
        registration system for the purpose of, or as a factor in 
        determining, whether a seller has a nexus with that Member 
        State for any tax at any time.
            (2) Uniform definitions of products and product-based 
        exemptions from which a Member State may choose its individual 
        tax base, provided, however, that all local jurisdictions in 
        that Member State shall have a common tax base identical to the 
        State tax base of that Member State. A Member State may enact 
        other product-based exemptions without restriction if the 
        Agreement does not have a definition for the product or for a 
        term that includes the product. A Member State shall relax the 
        good faith requirement for acceptance of exemption certificates 
        in accordance with section 317 of the Agreement, as amended 
        through the date of enactment of this Act.
            (3) Uniform rules for sourcing and attributing transactions 
        to particular taxing jurisdictions.
            (4) Uniform procedures for the certification of service 
        providers and software on which a seller may elect to rely in 
        order to determine Member State sales and use tax rates and 
        taxability.
            (5) Uniform rules for bad debts and rounding.
            (6) Uniform requirements for tax returns and remittances.
            (7) Consistent electronic filing and remittance methods.
            (8) Single, State-level administration of all Member State 
        and local sales and use taxes, including a requirement for a 
        State-level filing of tax returns in each Member State.
            (9) A single sales and use tax rate per taxing 
        jurisdiction, except that a State may impose a single 
        additional rate, which may be zero, on food, food ingredients, 
        and drugs, provided that this limitation does not apply to the 
        items identified in section 308 C of the Agreement, as amended 
        through the date of enactment of this Act.
            (10) A Member State shall eliminate caps and thresholds on 
        the application of sales and use tax rates and exemptions based 
        on value, provided that this limitation does not apply to the 
        items identified in section 308 C of the Agreement, as amended 
        through the date of enactment of this Act.
            (11) A provision requiring each Member State to complete a 
        taxability matrix, as adopted by the Governing Board. The 
        matrix shall include information regarding terms defined by the 
        Agreement in the Library of Definitions. The matrix shall also 
        include, pursuant to the requirements of the Governing Board, 
        information on use, entity, and product based exemptions.
            (12) A provision requiring that each Member State relieves 
        a seller or service provider from liability to that Member 
        State and local jurisdiction for collection of the incorrect 
        amount of sales or use tax, and relieves the purchaser from 
        penalties stemming from such liability, provided that 
        collection of the improper amount is the result of relying on 
        information provided by that Member State regarding tax rates, 
        boundaries, or taxing jurisdiction assignments, or in the 
        taxability matrix regarding terms defined by the Agreement in 
        the Library of Definitions.
            (13) Audit procedures for sellers, including an option 
        under which a seller not qualifying for the small business 
        exception in section 4(d) may request, by notifying the 
        Governing Board, to be subject to a single audit on behalf of 
        all Member States for sales and use taxes (other than use taxes 
        on goods and services purchased for the consumption of the 
        seller). The Governing Board, in its discretion, shall 
        authorize such a single audit.
            (14) As of the day that authority to require collection 
        commences under section 4, each Member State shall provide 
        reasonable compensation for expenses incurred by a seller 
        directly in administering, collecting, and remitting sales and 
        use taxes (other than use taxes on goods and services purchased 
        for the consumption of the seller) to that Member State. Such 
        compensation may vary in each Member State depending on the 
        complexity of the sales and use tax laws in that Member State 
        and may vary by the characteristics of sellers in order to 
        reflect differences in collection costs. Such compensation may 
        be provided to a seller or a third party service provider whom 
        a seller has contracted with to perform all the sales and use 
        tax responsibilities of a seller.
            (15) Appropriate protections for consumer privacy.
            (16) Governance procedures and mechanisms to ensure timely, 
        consistent, and uniform implementation and adherence to the 
        principles of the streamlined system and the terms of the 
        Agreement.
            (17) Each Member State shall apply the simplification 
        requirements of the Agreement to taxes on telecommunications 
        services, except as provided herein. This requirement is 
        applicable to Member States as of July 1, 2010, except that 
        sales and use taxes on telecommunications services shall be 
        subject to the Agreement and the authority granted to the 
        Member States when the requirements of section 4(a) are met. On 
        or after July 1, 2010, for those Member States which meet the 
        requirements of this paragraph, the authority granted such 
        Member States under section 4 may be exercised by such Member 
        States, pursuant to the terms of section 4 and section 6, with 
        respect to taxes on telecommunications services other than 
        sales and use taxes on such services. The following are 
        exceptions to the requirement established under this paragraph:
                    (A) The requirement for one uniform return shall 
                not apply, provided, however, there shall be one 
                uniform return for each type of tax on 
                telecommunications services within a State.
                    (B) The requirements for rate simplification are 
                modified to require that each taxing jurisdiction shall 
                have only one rate for each type of tax on 
                telecommunications services.
                    (C) The requirements for tax base uniformity in 
                section 302 of the Agreement shall apply to each type 
                of tax on telecommunications services within a State, 
                but shall not be construed to require that the tax base 
                for different types of taxes on telecommunications 
                services must be identical to the tax base for sales 
                and use taxes imposed on telecommunications services.
            (18) Uniform rules and procedures for ``sales tax 
        holidays''.
            (19) Uniform rules and procedures to address refunds and 
        credits for sales taxes relating to customer returns, 
        restocking fees, discounts and coupons, and rules to address 
        allocations of shipping and handling and discounts applied to 
        multiple item and multiple seller orders.
    (b) Requirement to Provide Simplified Tax Systems.--
            (1) In general.--The requirements of this section are 
        intended to ensure that each Member State provides and 
        maintains the necessary simplifications to its sales and use 
        tax system to warrant the collection authority granted to it in 
        section 4.
            (2) Reduction of administrative burdens.--The requirements 
        of this section should be construed--
                    (A) to require each Member State to substantially 
                reduce the administrative burdens associated with sales 
                and use taxes; and
                    (B) as allowing each Member State to exercise 
                flexibility in how these requirements are satisfied.
            (3) Exception.--In instances where exceptions to the 
        requirements of this section can be exercised in a manner that 
        does not materially increase the administrative burden on a 
        seller obligated to collect or pay the taxes, such exceptions 
        are permissible.

SEC. 8. LIMITATION.

    (a) In General.--Nothing in this Act shall be construed as--
            (1) subjecting a seller to franchise taxes, income taxes, 
        or licensing requirements of a Member State or political 
        subdivision thereof; or
            (2) affecting the application of such taxes or requirements 
        or enlarging or reducing the authority of any Member State to 
        impose such taxes or requirements.
    (b) No Effect on Nexus, etc.--
            (1) In general.--No obligation imposed by virtue of the 
        authority granted by section 4 shall be considered in 
        determining whether a seller has a nexus with any Member State 
        for any other tax purpose.
            (2) Permissible member state authority.--Except as provided 
        in subsection (a), and in section 4, nothing in this Act 
        permits or prohibits a Member State from--
                    (A) licensing or regulating any person;
                    (B) requiring any person to qualify to transact 
                intrastate business;
                    (C) subjecting any person to State taxes not 
                related to the sale of goods or services; or
                    (D) exercising authority over matters of interstate 
                commerce.

SEC. 9. EXPEDITED JUDICIAL REVIEW.

    (a) Three-Judge District Court Hearing.--Notwithstanding any other 
provision of law, any civil action challenging the constitutionality of 
this Act, or any provision thereof, shall be heard by a district court 
of three judges convened pursuant to the provisions of section 2284 of 
title 28, United States Code.
    (b) Appellate Review.--
            (1) In general.--Notwithstanding any other provision of 
        law, an interlocutory or final judgment, decree, or order of 
        the court of three judges in an action under subsection (a) 
        holding this Act, or any provision thereof, unconstitutional 
        shall be reviewable as a matter of right by direct appeal to 
        the Supreme Court.
            (2) 30-day time limit.--Any appeal under paragraph (1) 
        shall be filed not more than 30 days after the date of entry of 
        such judgment, decree, or order.

SEC. 10. DEFINITIONS.

    For the purposes of this Act the following definitions apply:
            (1) Affiliate.--The term ``affiliate'' means any entity 
        that controls, is controlled by, or is under common control 
        with a seller.
            (2) Governing board.--The term ``Governing Board'' means 
        the governing board established by the Streamlined Sales and 
        Use Tax Agreement.
            (3) Member state.--The term ``Member State''--
                    (A) means a Member State as that term is used under 
                the Streamlined Sales and Use Tax Agreement as of the 
                date of enactment of this Act;
                    (B) does not include associate members under the 
                Agreement; and
                    (C) includes any federally recognized Indian Tribe 
                that is accorded Member State status under the 
                Agreement pursuant to section 5.
            (4) Nationwide.--The term ``nationwide'' means throughout 
        each of the several States and the District of Columbia, the 
        Commonwealth of Puerto Rico, Guam, American Samoa, the Virgin 
        Islands, the Northern Mariana Islands, and any other territory 
        or possession of the United States.
            (5) Nondiscretionary duty of the governing board.--The 
        phrase ``nondiscretionary duty of the Governing Board'' means 
        any duty of the Governing Board specified in the Agreement as a 
        requirement for action by use of the term ``shall'', ``will'', 
        or ``is required to''.
            (6) Person.--The term ``person'' means an individual, 
        trust, estate, fiduciary, partnership, corporation, federally 
        recognized Indian Tribe or Tribal government, State or local 
        government, or any other legal entity.
            (7) Remote sale.--The term ``remote sale'' refers to a sale 
        of goods or services attributed to a particular Member State 
        with respect to which a seller does not have adequate physical 
        presence to establish nexus under the law existing on the day 
        before the date of enactment of this Act so as to allow such 
        Member State to require, without regard to the authority 
        granted by this Act, the seller to collect and remit sales or 
        use taxes with respect to such sale.
            (8) Remote seller.--The term ``remote seller'' means any 
        seller who makes a remote sale.
            (9) State.--The term ``State'' means any State of the 
        United States of America and includes the District of Columbia, 
        Puerto Rico, and any other territory or possession of the 
        United States.
            (10) Streamlined sales and use tax agreement.--The term 
        ``Streamlined Sales and Use Tax Agreement'' (or ``the 
        Agreement'') means the multistate agreement with that title 
        adopted on November 12, 2002, as amended through the date of 
        enactment of this Act and unless the context otherwise 
        indicates as further amended from time to time.
            (11) Tax on telecommunications services.--The term ``tax on 
        telecommunications services'' or ``taxes on telecommunication 
        services'' shall encompass the same taxes, charges, or fees as 
        are included in section 116 of title 4, United States Code, 
        except that ``telecommunication services'' shall replace 
        ``mobile telecommunications services'' whenever such term 
        appears.
            (12) Telecommunications service.--
                    (A) In general.--The term ``telecommunications 
                service'' means the electronic transmission, 
                conveyance, or routing of voice, data, audio, video, or 
                any other information or signals to a point, or between 
                or among points.
                    (B) Inclusion.--The term ``telecommunication 
                service''--
                            (i) includes transmission services in which 
                        computer processing applications are used to 
                        act on the form, code, or protocol of the 
                        content for purposes of transmission, 
                        conveyance, or routing without regard to 
                        whether such services are referred to as voice 
                        over Internet protocol services or are 
                        classified by the Federal Communications 
                        Commission as enhanced or value added services; 
                        and
                            (ii) does not include the data processing 
                        and information services that allow data to be 
                        generated, acquired, stored, processed, or 
                        retrieved and delivered by an electronic 
                        transmission to a purchaser where the primary 
                        purpose of such purchaser for the underlying 
                        transaction is the processed data or 
                        information.

SEC. 11. SENSE OF THE CONGRESS ON DIGITAL GOODS AND SERVICES.

    It is the sense of the Congress that each State that is a party to 
the Agreement should work with other States that are also party to the 
Agreement to prevent double taxation in situations where a foreign 
country has imposed a transaction tax on a digital good or service.
                                 <all>