House Bill H0283
2015 Freedom Index Score: (-10)
Analyst: Parrish Miller
Date of analysis: March 18, 2015
ANALYST'S NOTE: House Bill 283 is known as the "Streamlined Sales Tax Simplification Act" and it makes
many changes to Idaho's tax law. Contrary to its advocates' claims that it only sets up the state to
implement an online sales tax mandate, this 40-page bill makes numerous other changes to code as well
which will serve to increase taxes for most people.
The primary purpose of the bill is for the state of Idaho to join the "Streamlined Sales and Use Tax
Governing Board" which is the entity working to implement a massive de facto tax increase across the
nation. Just to join the Board requires the state to pay a $20,000 application fee and annual dues of
$26,000. Additionally, implementing the new software required will cost the state in excess of a quarter
million dollars.
There is also a significant element of cronyism in this bill whereby the state tax commission certifies
certain "service providers" (CSP) and "automated systems" (CAS) and provides these entities a
"monetary allowance" to assist in the state's collection of taxes.
Most notably, and most problematically, House Bill 283 sets up a de facto tax increase on most Idahoans
to the tune of $30 - $50 million annually. While some will gripe that such taxes are already technically
required to be paid under Idaho's "use tax" law, the simple fact remains that because they are not
routinely paid and because the law is not generally enforced, Idahoans will still suffer all of the normal
economic hardships associated with a major tax increase.
Instead of working with other states to enforce this tax and to transfer even more money from the
productive sector of society to the government, Idaho should instead repeal the use tax for purchases
made by Idahoans outside the state of Idaho (whether online or otherwise) and thereby legalize
commerce over which the state has no reasonable or logical jurisdiction.
Point No. 3 — Does it give government any new, additional, or expanded power to prohibit, restrict, or
regulate activities in the free market? Conversely, does it eliminate or reduce government intervention in
the market?
ANALYSIS: House Bill 283 creates Section 63-3615B, Idaho Code, to define 24 terms. Among
these are "certified automated system" and "certified service provider." A "certified automated
system" is defined as "software certified under the streamlined sales tax 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." A "certified service
provider" is defined as "an agent certified under the streamlined sales tax agreement to perform
all the seller's sales and use tax functions, other than the seller's obligation to remit tax on its
own purchases." Government should not be certifying either software or individuals. [Page 8,
lines 38-45] (-1)
ANALYSIS: House Bill 283 creates Chapter 46, Title 63, Idaho Code, which it ironically titled the
"streamlined sales tax simplification act." This new 20 page chapter of Idaho code does little to
'simplify' anything and instead sets up a highly convoluted tax collection scheme involving a
multi-state compact, ostensibly voluntary participation by retailers, claimed 'amnesty' for
actions which are not illegal, and a healthy dose of cronyism. (-1)
In addition to empowering the state tax commission to "participate in an online sales and use
tax registration system in cooperation with the other member states," the bill calls upon the
commission to set up a "taxability matrix," presumably to track the taxability of products and
services. Joining the "Streamlined Sales and Use Tax Governing Board" will require the state to
pay a $20,000 application fee in fiscal year 2016 and dues of $26,000 (less the $20,000
application fee paid in 2016) in fiscal year 2017. It is also estimated that implementing the new
software required will cost the state in excess of a quarter million dollars. (-1)
The newly created Section 63-4622, Idaho Code, declares that "the commission shall provide an
online registration system that will allow sellers to register in all the member states of the
streamlined sales tax agreement." It goes on to say that "by registering, the seller agrees to
collect and remit sales and use taxes for all taxable sales into the member states, including
member states joining after the seller's registration. Withdrawal or revocation of a member
state shall not relieve a seller of its responsibility to remit taxes previously or subsequently
collected on behalf of the state." While this seller participation is initially voluntary, like all
government programs, it will not remain this way. The goal is that when Congress passes the
erroneously named "market place fairness act," participation will become mandatory. [Page 37,
lines 1-8] (-1)
The state's plan to bribe retailers into signing up to collect taxes for the state is twofold. First,
Section 63-4623 offers "amnesty" to sellers "for uncollected or unpaid sales or use tax" if they
register to collect tax "within twelve (12) months of the effective date of the state's
participation in the streamlined sales tax agreement." Despite the use of the word "amnesty,"
there is no legal obligation for sellers to collect sales and use tax for customers who reside in
another state. Presumably this amnesty extends to uncollected taxes for in-state purchasers as
well, but the overall goal is to induce retailers into this tax collection program. The amnesty
provisions also require that the seller remain registered and collect and remit taxes for at least
three years. [Page 37, lines 9-42] (-1)
The second part of the bribe is where the worst of the cronyism resides. The "certified
automated systems" (CAS) and "certified service providers" (CSP) defined back in Section 633615B, Idaho Code, now come into play. When sellers register to serve as tax collectors for the
state, they do so in one of three categories. These categories are as follows:
(1) Model 1, wherein a seller selects a CSP as an agent to perform all the seller's sales or
use tax functions, other than the seller's obligation to remit tax on its own purchases.
(2) Model 2, wherein a seller selects a CAS to use that calculates the amount of tax due on a
transaction.
(3) Model 3, wherein a seller utilizes its own proprietary automated sales tax system that
has been certified as a CAS.
You will notice that all three methods require either certification or the use of certified software
or personnel. One major issue with implementing an online sales tax is the burden placed on
sellers, but this system is designed to use tax money to bribe retailers to serve as tax collectors.
(In case you're wondering who gets the short end of the stick here, it's the customers.) In
addition to certifying software and providers under this program, the commission will offer a
"monetary allowance" to a CSP under Model 1 and to sellers under Model 2. This allowance
could include a base rate and/or a percentage kickback of the taxes collected. The kickback
would be limited to two years, but an undefined "vendor discount" will be available after that
period. [Page 37, lines 43-48; Pages 38-39; Page 40, lines 1-9] (-1)
Point No. 5 — Does it directly or indirectly create or increase any taxes, fees, or other assessments?
Conversely, does it eliminate or reduce any taxes, fees, or other assessments?
ANALYSIS: House Bill 283 modifies Section 63-3607, Idaho Code, to expand the definition of a
"person" for both Chapter 36, Title 63, Idaho Code, and the newly created Chapter 46, Title 63,
Idaho Code. Added to the existing definition are "partnership," "fiduciary," "limited liability
company," "limited partnership," and "any other legal entity." As this definition relates to the
payment of taxes, its expansion serves to bring more entities under the scope and enforcement
provisions of these chapters. [Page 2, lines 22-28] (-1)
ANALYSIS: House Bill 283 modifies Section 63-3612(2), Idaho Code, to add a new category of
taxable sales, namely "the sale, lease or rental of digital products, including specified digital
products and digital codes, that provide a purchaser with the right to obtain one (1) or more
digital products and regardless of the method by which the title, possession or right to use the
digital product is transferred to the user." [Page 5, lines 31-35] (-1)
House Bill 283 modifies 63-3608, Idaho Code, to expand the definition of purchase to
include "transactions described in section 63-3612(2), Idaho Code." [Page 2, lines31-39]
House Bill 283 modifies Section 63-3609, Idaho Code, to declare that "a retail sale also
means any sale described in section 63-3612(2), Idaho Code." [Page 3, lines 1-6]
House Bill 283 modifies Section 63-3610, Idaho Code, to declare that the term "retailer"
will now include every "seller" who makes a "sale or sales as described in section 633612(2), Idaho Code." It also expands the definition of "retailer" to include "every
person making more than two ... retail sales as described in section 63-3612(2), Idaho
Code, during any twelve (12) month period..." [Page 3, lines 16-31]
House Bill 283 modifies Section 63-3611, Idaho Code, to expand the definition of
"retailer engaged in business in this state" to include "any retailer who ... has sufficient
contact with this state, in accordance with the constitution of the United States, to allow
the state to require the seller to collect and remit use tax on sales of tangible personal
property or sales as described in section 63-3612(2), Idaho Code, made to customers in
this state." [Page 4, lines 1-11]
House Bill 283 modifies Section 63-3613, Idaho Code, to expand the definition of the
term "sales price" to include "the total amount for which ... a transaction as described in
section 63-3612(2), Idaho Code, ... is sold, rented, or leased." [Page 5, lines 41-48; Page
6, lines 1-2]
House Bill 283 modifies Section 63-3614, Idaho Code, to expand the definition of the
term "seller" to include every person making retail sales as described in section 633612(2), Idaho Code. [Page 8, lines 26-30]
House Bill 283 modifies Section 63-3621, Idaho Code, to declare that "an excise tax is
hereby imposed on ... any transaction as described in section 63-3612(2), Idaho Code."
[Page 14, lines 6-15]
House Bill 283 further modifies Section 63-3621, Idaho Code, to declare that "every
person storing, using, or otherwise consuming, in this state, tangible personal property
or any transaction as described in section 63-3612(2), Idaho Code, is liable for the tax."
[Page 14, lines 16-26]
House Bill 283 further modifies Section 63-3621, Idaho Code, to require that "every
retailer engaged in business in this state, and making ... any transaction as described in
section 63-3612(2), Idaho Code, ... shall, at the time of making the sales ... collect the tax
from the purchaser." [Page 14, lines 27-36]
ANALYSIS: House Bill 283 modifies Section 63-3616, Idaho Code, to expand the definition of the
term "tangible personal property" to include "electricity, water, gas, steam and prewritten
computer software." [Page 12, lines 31-34] (-1)
ANALYSIS: House Bill 283 creates Chapter 46, Title 63, Idaho Code, titled the "streamlined sales
tax simplification act." Among other things, this chapter positions Idaho and many other states
to begin collecting sales tax on goods purchased from out-of-state sellers via the internet. When
fully implemented, this will result in a de facto $30 - $50 million annual tax hike on Idahoans.
While it is true that many of these taxes are technically required to be paid under Idaho's "use
tax" law, these taxes are not routinely paid and the law is not generally enforced, therefore
Idahoans will still suffer all of the normal economic hardships associated with a major tax
increase. [Page 20, lines 31-43; Pages 21-39; Page 40, lines 1-9] (-1)