No. 144. an Act Relating to Miscellaneous Tax Amendments

NO. 144Page 1

NO. 144. AN ACT RELATING TO MISCELLANEOUS TAX AMENDMENTS.

(H.771)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1. 32 V.S.A. § 5823(a)(2) is amended to read:

(2) Military pay for full-time active duty with the armed services earned outside of the state; and the first $1,500.00$2,000.00 of military pay for unit training assemblies in the state to National Guard and United States Reserve personnel who were enlisted for the full calendar year, attended all 48 unit training assemblies as certified by the federal Defense Finance and Accounting Service Military Leave and Earnings Statement, DFAS Form 702, or for whom the adjutant general or reserve component commander certifies that the taxpayer completed all unit training assemblies of his or her unit during the calendar training year, and who hadhas a federal adjusted gross income of less than $47,000.00 in the prior tax year$50,000.00;

Sec. 2. 32 V.S.A. § 5823(b)(3) is amended to read:

(3) Wages, salaries, commissions or other income (excluding military pay for fulltime active duty with the armed services and also excluding funds received through the federal armed forces educational loan repayment program under 10 U.S.C. chapters 109 and 1609; and also excluding the first $1,500.00$2,000.00 of military pay for unit training assemblies in the state to National Guard and United States Reserve personnel who were enlisted for the full calendar year, attended all 48 unit training assemblies as certified by the federal Defense Finance and Accounting Service Military Leave and Earnings Statement, DFAS Form 702, or for whom the adjutant general or reserve component commander certifies that the taxpayer completed all unit training assemblies of his or her unit during the calendar training year, and who hadhas a federal adjusted gross income of less than $47,000.00 in the prior tax year$50,000.00) received with respect to services performed within this state; and also excluding income received for a dramatic performance in a commercial film production to the extent such income would be excluded from personal income taxation in the state of residence;

Sec. 3. 32 V.S.A. § 5401(1)(D) is amended to read:

(D) Personal property, machinery, inventory and equipment, ski lifts and snow-making equipment for a ski area; provided, however, that this subdivision shall not exclude from the definition of “nonresidential property” the following real or personal property:

(i) utility cables and lines, poles and fixtures (except those taxed under subchapter 6 of chapter 211 of Title 32); provided that utility cables, lines, poles and fixtures located on homestead property and owned by the person claiming the homestead shall be taxed as homestead property;

(ii) gas distribution lines (except aboveground meters, regulators and gauges, and leased water heaters are excluded personal property);

(iii) ski lifts and fixtures and snow-making equipment for a ski area affixed to the land excluding transportable equipment.

Sec. 4. DEFINITIONS

As used in Secs. 4 through 11 of this act:

(1) “Agreement” means the Streamlined Sales and Use Tax Agreement.

(2) “Certified Automated System” means software certified jointly by the states that are signatories to the Agreement to calculate the tax imposed by each jurisdiction on a transaction, determine the amount of tax to remit to the appropriate state, and maintain a record of the transaction.

(3) “Certified Service Provider” means an agent certified jointly by the states that are signatories to the Agreement to perform all of the seller’s sales tax functions.

(4) “Person” means an individual, trust, estate, fiduciary, partnership, limited liability company, limited liability partnership, corporation, or any other legal entity.

(5) “Sales Tax” means the tax levied under chapter 233 of Title 32.

(6) “Seller” means any person making sales, leases, or rentals of personal property or services.

(7) “State” means any state of the United States and the District of Columbia.

(8) “Use Tax” means the tax levied under chapter 233 of Title 32.

Sec. 5. LEGISLATIVE FINDING

The General Assembly finds that this state should enter into an 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.

Sec. 6. AUTHORITY TO ENTER AGREEMENT

(a) The Department of Taxes is authorized and directed to enter into the Streamlined Sales and Use Tax Agreement for the State of Vermont 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. In furtherance of the Agreement, the Department of Taxes is authorized 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 commissioner shall publicize reasonable and timely notice to any interested parties of all times and dates of formal meetings of the Streamlined Sales and Use Tax negotiations.

(b) The Department of Taxes is further authorized to take other actions reasonably required to implement the provisions set forth in this act. Other actions authorized by this section include, but are not limited to, the adoption of rules and regulations and the joint procurement, with other member states, of goods and services in furtherance of the cooperative agreement. The Commissioner of Taxes, or the commissioner’s designee, is authorized to represent this state before the other states that are signatories to the Agreement.

Sec. 7. RELATIONSHIP TO STATE LAW

No provision of the Agreement authorized by this act in whole or part invalidates or amends any provision of the law of this state. Adoption of the Agreement by this state does not amend or modify any law of this state. Implementation of any condition of the Agreement in this state, whether adopted before, at, or after membership of this state in the Agreement, must be by the specific action of this state.

Sec. 8. AGREEMENT REQUIREMENTS

The Department of Taxes shall not enter into the Streamlined Sales and Use Tax Agreement unless the Agreement requires each state to abide by the following requirements:

(1) Uniform State Rate. The Agreement must set restrictions to achieve, over time, more uniform state rates through limiting:

(A) the number of state rates;

(B) the application of maximums on the amount of state tax that is due on a transaction; and

(C) limiting the application of thresholds on the application of state tax.

(2) Uniform Standards. The Agreement must establish uniform standards for:

(A) the sourcing of transactions to taxing jurisdictions;

(B) the administration of exempt sales;

(C) the allowances a seller can take for bad debts; and

(D) sales and use tax returns and remittances.

(3) Uniform Definitions. The Agreement must require states to develop and adopt uniform definitions of sales and use tax terms. The definitions must enable a state to preserve its ability to make policy choices not inconsistent with the uniform definitions.

(4) Central Registration. The Agreement must provide a central, electronic registration system that allows a seller to register to collect and remit sales and use taxes for all signatory states.

(5) No Nexus Attribution. The Agreement must provide that registration with the central registration system and the collection of sales and use taxes in the signatory states will not be used as a factor in determining whether the seller has nexus with a state for any tax.

(6) Local Sales and Use Taxes. The Agreement must provide for reduction of the burdens of complying with local sales and use taxes through:

(A) restricting variances between the state and local tax bases;

(B) requiring states to administer any sales and use taxes levied by local jurisdictions within the state so sellers collecting and remitting these taxes will not have to register or file returns with, remit funds to, or be subject to independent audits from local taxing jurisdictions;

(C) restricting the frequency of changes in the local sales and use tax rates and setting effective dates for the application of local jurisdictional boundary changes to local sales and use taxes; and

(D) providing notice of changes in local sales and use tax rates and of changes in the boundaries of local taxing jurisdictions.

(7) Monetary Allowances. The Agreement must outline any monetary allowances that are to be provided by the states to sellers or certified service providers.

(8) State Compliance. The Agreement must require each state to certify compliance with the terms of the Agreement prior to joining, and to maintain compliance, under the laws of the member state, with all provisions of the Agreement while a member.

(9) Consumer Privacy. The Agreement must require each state to adopt a uniform policy for Certified Service Providers that protects the privacy of consumers and maintains the confidentiality of tax information.

(10) Advisory Councils. The Agreement must provide for the appointment of an advisory council of private sector representatives and an advisory council of nonmember state representatives to consult with in the administration of the Agreement.

Sec. 9. COOPERATING SOVEREIGNS

The Agreement authorized by this act 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. 10. LIMITED BINDING AND BENEFICIAL EFFECT

(a) The Agreement authorized by this act binds and inures only to the benefit of this state and the other member states. No person, other than a member state, is an intended beneficiary of the Agreement. Any benefit to a person other than a state is established by the law of this state and the other member states, and not by the terms of the Agreement.

(b) Consistent with subsection (a) of this section, no person shall have any cause of action or defense under the Agreement or by virtue of this state’s approval of the Agreement. No person may challenge, in any action brought under any provision of law, any action or inaction by any department, agency, or other instrumentality of this state, or any political subdivision of this state on the ground that the action or inaction is inconsistent with the Agreement.

(c) No law of this state, or the application thereof, may be declared invalid as to any person or circumstance on the ground that the provision or application is inconsistent with the Agreement.

Sec. 11. SELLER AND THIRD PARTY LIABILITY

(a) A Certified Service Provider is the agent of a seller with whom the Certified Service Provider has contracted for the collection and remittance of sales and use taxes. As the seller’s agent, the Certified Service Provider is liable for sales and use tax due each member state on all sales transactions it processes for the seller, except as set out in this section.

(b) A seller that contracts with a Certified Service Provider is not liable to the state for sales or use tax due on transactions processed by the Certified Service Provider unless the seller misrepresented the type of items it sells or committed fraud. In the absence of probable cause to believe that the seller has committed fraud or made a material misrepresentation, the seller is not subject to audit on the transactions processed by the Certified Service Provider. A seller is subject to audit for transactions not processed by the Certified Service Provider. The member states acting jointly may perform a system check of the seller and review the seller’s procedures to determine if the Certified Service Provider’s system is functioning properly, and the extent to which the seller’s transactions are being processed by the Certified Service Provider.

(c) A person that provides a Certified Automated System is responsible for the proper functioning of that system, and is liable to the state for underpayments of tax attributable to errors in the functioning of the Certified Automated System. A seller that uses a Certified Automated System remains responsible and is liable to the state for reporting and remitting tax.

(d) A seller that has a proprietary system for determining the amount of tax due on transactions and has signed an agreement establishing a performance standard for that system is liable for the failure of the system to meet the performance standard.

Sec. 12. 32 V.S.A. § 9741(45) is amended to read:

(45) Each article, with a purchase price of $110.00 or less, of clothing intended to be worn or carried on or about the human body, including footwear but excluding special clothing or footwear designed primarily for athletic activity or protective use and not normally worn except when so used; except specially protective steel- or Kevlar-toed footwear labeled as American National Standards Institute-approved under standard Z41 shall be exempt, regardless of price.

Sec. 13. 32 V.S.A. § 9744 is amended to read:

§ 9744. PROPERTY EXEMPT FROM USE TAX

(a) The following uses of property are not subject to the compensating use tax imposed under this chapter:

* * *

(5) Building materials and supplies stored in this state for 180 days or less, if purchased by a contractor for the construction, reconstruction, alteration, remodeling or repair of real property in a state which has no sales or use tax.

Sec. 14. 32 V.S.A. § 3111 is added to read:

§ 3111. INTERNAL REVENUE SERVICE CHARGES

Notwithstanding section 502 of this title, the commissioner may charge against any state tax liability a fee agreed to by the department and paid to the United States Treasury Department for participation in a debt setoff program.

Sec. 15. 32 V.S.A. § 6061(5) is amended to read:

(5) “Modified adjusted gross income” means the sum of “adjusted gross income” as defined in section 5811 of this title:

* * *

(B) with the addition of the following, to the extent not included in adjusted gross income: alimony, support money, cash public assistance and relief (not including relief granted under this subchapter), cost of living allowances paid to federal employees, allowances received by dependents of servicemen and women, the gross amount of any pension or annuity (including the portion of Roth IRA distributions representing investment earnings and not included in adjusted gross income, railroad retirement benefits, all payments received under the federal Social Security Act, and all benefits under Veterans’ Acts),benefits under Veterans’ Acts, andfederal pension and annuity benefits not included in adjusted gross income; nontaxable interest received from the state or federal government or any of its instrumentalities, workers’ compensation, the gross amount of “loss of time” insurance, and the amount of capital gains excluded from adjusted gross income, less the net employment and selfemployment taxes withheld from or paid by the individual (exclusive of any amounts deducted to arrive at adjusted gross income or deducted on account of excess payment of employment taxes) on account of income included under this section, less any amounts paid as child support money if substantiated by receipts or other evidence that the commissioner may require; and

(C) without the inclusion of gifts from nongovernmental sources, surplus food or other relief in kind supplied by a governmental agency, or the first $4,000.00of income earned by a full-time student who qualifies as a dependent of the claimant under the federal Internal Revenue Code, or the first $4,000.00of income received by a parent who qualifies as a dependent of the claimant under the Internal Revenue Code, or payments made by the state for foster care or to a family for the support of an eligible person with a developmental disability as defined in subdivision 8722(2) of Title 18. If the commissioner determines, upon application by the claimant, that a person resides with a claimant who is disabled or was at least 62 years of age as of the end of the year preceding the claim, for the primary purpose of providing attendant care services (as defined in section 6321 of Title 33) or homemaker or companionship services, with or without compensation, which allow the claimant to remain in his or her home or avoid institutionalization, the commissioner shall exclude that person’s modified adjusted gross income from the claimant’s household income. The commissioner may require that a certificate in a form satisfactory to the commissioner be submitted which supports the claim.

Sec. 16. 32 V.S.A. § 6062(a) is amended to read:

(a) In the case of a renter credit claim based solely on rent constituting property taxes, the claimant shall have rented property during the entire taxable year; provided, however, that a claimant who owned a homestead which was sold in the taxable year and who does not own another homestead on December 31 of the taxable yearprior to April 1 may file a renter credit claim. If two or more individuals of a household are able to meet the qualifications for a claimant hereunder, they may determine among them who the claimant shall be. Any disagreement under this subsection shall be referred to the commissioner and his or her decision shall be final.