HBA-KDB H.B. 1845 77(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 1845 By: Oliveira Ways & Means 4/8/2001 Committee Report (Amended) BACKGROUND AND PURPOSE In Quill Corporation v. Heitkampf, the United States Supreme Court ruled that a state cannot require a company to collect sales taxes from customers in that state unless the company has a physical presence within the state. If a company has no physical presence, then a customer is required to pay taxes directly to the state on anything purchased from a catalog or from the Internet. There is concern that as sales over the Internet expand, each state faces further erosion of its tax base. Texas, along with 31 other participating states and 6 observing states, is a participating member in the federal Streamlined Sales Tax Project (SSTP) which has the purpose of designing a simplified sales collection system that can be used by traditional retailers as well as sellers involved in e-commerce. The expressed goal of SSTP is to substantially reduce the tax collection burden on retailers by creating uniformity among states and simplifying audit and administrative procedures with the use of emerging technologies. If the burden on retailers is reduced, out-of-state retailers may voluntarily collect use taxes and remit them to member states. Thus, states will be able to capture revenue that is currently uncollected. House Bill 1845 establishes the Simplified Sales and Use Tax Administration Act to reflect SSTP's proposed uniform act. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the comptroller of public accounts in SECTION 1 (Section 142.005, Tax Code) of this bill. ANALYSIS House Bill 1845 amends the Tax Code to establish the Simplified Sales and Use Tax Administration Act (Act). The bill requires the state to enter into multistate discussions for the purposes of reviewing or amending the Streamlined Sales and Use Tax Agreement (agreement) embodying the simplification requirements. The bill prohibits the state from being represented by more than four delegates for purposes of those discussions (Sec. 142.004). The comptroller of public accounts (comptroller) is authorized and directed to enter into the agreement with one 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. The bill authorizes the comptroller, in furtherance of the agreement, to act jointly with other states that are members of the agreement to establish standards for certification of a certified service provider and certified automated system and establish performance standards for multistate sellers. The bill authorizes the comptroller to take other actions reasonably required to implement the act, including adopting rules and jointly procuring, with other member states, goods and services to further the agreement. The comptroller or the comptroller's designee is authorized to represent the state before the other states that are signatories to the agreement (Sec. 142.005). The bill provides that the agreement does not, in whole or part, invalidate or amend a law of this state. Adoption of the agreement by the state does not amend or modify a law of this state. The bill provides that implementation of a condition of the agreement in this state, whether adopted before, at, or after membership of this state in the agreement, must be by the action of the state (Sec. 142.006). The bill sets forth requirements the comptroller is to follow to enter in the agreement (Sec. 142.007). The bill provides that the agreement is an accord among individual cooperating sovereigns 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. 142.008). The bill sets forth provisions for the limited binding and beneficial effect of the agreement (142.009). The bill sets forth provisions for seller and third party liability (Sec. 142.010). EFFECTIVE DATE On passage, or if the Act does not receive the necessary vote, the Act takes effect September 1, 2001. EXPLANATION OF AMENDMENTS Committee Amendment No. 1 provides that the comptroller of public accounts is authorized and directed to participate in the development of, rather than enter into, the Simplified Sales and Use Tax Administration Act and removes provisions that authorized the comptroller to adopt rules and jointly procure with other member states, goods and services to further the Streamlined Sales and Tax Agreement (Sec. 142.005).