Supplemental letter on Multistate Tax Commission draft model uniform statute: October 18, 2005.
Following up on Tax Executives Institute's testimony at the September 27, 2005, hearing on the Commission's Draft Model Uniform Statute on Reportable Transactions & Inconsistent Filing Positions, I am pleased to submit the following additional comments addressing the proposed amendment concerning nexus reporting. The proposed amendment seeks to impose a reporting obligation on any individual or entity that "regularly and systematically solicits business" in a State, but does not file an income tax return in that State. In essence, the proposed amendment seeks to codify the "nexus questionnaire" process used by many States, adding a penalty for failure to provide required information.
TEI has a significant interest in promoting sound tax policy, as well as the fair and efficient administration of the tax laws, at all levels of government. Because this proposed amendment is neither sound nor administrable, we urge the Commission to avoid including it in any proposed Model Uniform Statute on Reportable Transactions & Inconsistent Filing Positions.
TEI submits that the proposed amendment is not sound or administrable for the following reasons:
* Under the Commerce Clause, and in view of the U.S. Supreme Court's opinion in Quill v. North Dakota, requiring individuals and entities not having physical presence in the State to file a form with the tax agency is constitutionally suspect.
* The proposed amendment exceeds the purpose and scope of a draft model uniform statute on taxpayer disclosure requirements.
* The discretion given to tax agencies to change the manner and form or reporting, as well as add to the information that must be reported, is at odds with the Commission's express purpose of promoting uniformity.
* Current registration and licensing requirements, along with information-sharing arrangements with neighboring jurisdictions, provide sufficient information for the State's tax agency to decide whether a non-taxpayer might potentially have nexus and should be the subject of further inquiry, without burdening non-nexus interstate commercial activities with a filing requirement.
In our testimony and principal comments on the Commission's Draft Model Uniform Statute on Reportable Transactions & Inconsistent Filing Positions, we cautioned that States must be mindful of three overarching concerns, all of which are relevant here: (1) substantially increasing compliance costs without a commensurate improvement in the quality of information available to tax officials, (2) increasing uncertainty for interstate commercial activity, and (3) threatening penalties for entities and individuals not otherwise subject to the State's taxing jurisdiction. In sum, the proposed amendment should not be adopted.
Tax Executives Institute appreciates this opportunity to provide these additional comments in respect of the proposed amendment imposing a nexus reporting responsibility. These comments were prepared under the aegis of TEI's State and Local Tax Committee, whose chair is Janet M. Wilson. If you have any questions, please contact Ms. Wilson at 713.839.4838 or firstname.lastname@example.org or Gregory S. Matson of the Institute's legal staff at 202.638.5601 or email@example.com.
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|Date:||Nov 1, 2005|
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