Second Regular Session Sixty-ninth General Assembly STATE OF COLORADO INTRODUCED LLS NO. R14-0321.01 Esther van Mourik x4215 SCR14-004 SENATE SPONSORSHIP Steadman, HOUSE SPONSORSHIP Conti, Senate Committees House Committees Finance SENATE CONCURRENT RESOLUTION 14-004 Submitting to the registered electors of the state of Colorado an amendment to the Colorado constitution concerning statewide uniform sales and use tax definitions, and, in connection therewith, creating a commission on uniform sales and use tax definitions that will certify the statewide sales and use tax definitions and will provide official guidance regarding the definitions, and specifying that the state and any local taxing jurisdictions shall use the certified sales and use tax definitions and official guidance for purposes of administering and levying its sales and use tax. Resolution Summary (Note: This summary applies to this resolution as introduced and does not reflect any amendments that may be subsequently adopted. If this resolution passes third reading in the house of introduction, a resolution summary that applies to the reengrossed version of this resolution will be available at http://www.leg.state.co.us/billsummaries.) The resolution creates the Colorado commission on uniform sales and use tax definitions (commission) in the department of revenue. The commission consists of 7 members who must have professional experience in sales and use tax and who are appointed by the governor through specified nominations with the consent of the senate. The commission's duties are to: Certify all definitions necessary to establish a comprehensive body of statewide uniform sales and use tax definitions that the state and local taxing jurisdictions must use; and Provide official guidance regarding the certified sales and use tax definitions. The certified definitions must be promulgated as rules by the commission pursuant to the state administrative procedure act. The resolution specifies the state and any local taxing jurisdiction shall use the certified sales and use tax definitions and any official guidance relating thereto for purposes of administering and levying its sales and use tax. The resolution allows the state and any applicable local taxing jurisdiction to adopt a tax rate increase without advance voter approval in order to ensure revenue neutrality based on revenue projections as a result of the application of the definitions certified by the commission. WHEREAS, The general assembly hereby finds and declares that: (1) The complexity of the existing sales and use tax structure in Colorado is burdensome for businesses in the state; (2) Colorado has nearly three hundred taxing authorities with differing sales and use tax bases, and when overlapping boundaries are taken into account there are over seven hundred areas with different rates, taxable and nontaxable items, and definitions; (3) Through their constitutional authority, home rule jurisdictions have exercised their right to establish their own sales and use tax systems, including their own rates, taxable and nontaxable items, and definitions; (4) The resulting lack of uniformity can be especially cumbersome for businesses operating in multiple jurisdictions in Colorado; (5) Because many of the local and special taxing jurisdictions rely heavily on the revenues produced by sales and use taxes, adopting uniform taxable and nontaxable items is difficult to achieve; (6) Adopting uniform definitions is a major step toward reducing the complexity in the state's sales and use tax structure, but equally important is ensuring that there be a uniform interpretation of the definitions because it is not uncommon for two jurisdictions with the same definition to differ in their interpretation of the definition; and (7) The creation of a commission on uniform sales and use tax definitions where that commission both certifies statewide sales and use tax definitions and provides official guidance regarding those certified definitions will serve the public interest by effectively ensuring statewide uniformity in the interpretation of the sales and use tax definitions and will help the state's sales and use tax structure become more business-friendly; now, therefore, Be It Resolved by the Senate of the Sixty-ninth General Assembly of the State of Colorado, the House of Representatives concurring herein: SECTION 1. At the next election at which such question may be submitted, there shall be submitted to the registered electors of the state of Colorado, for their approval or rejection, the following amendment to the constitution of the state of Colorado, to wit: In the constitution of the state of Colorado, add article XXX as follows: ARTICLE XXX Statewide Uniform Sales and Use Tax Definitions Section 1. Definitions. As used in this article, unless the context otherwise requires: (1) "Colorado commission on uniform sales and use tax definitions" or "commission" means the Colorado commission on uniform sales and use tax definitions created in section 2 of this article. (2) "Local taxing jurisdiction" means a city, town, municipality, county, city and county, special district, or authority authorized to levy a sales and use tax pursuant to law, including any municipality governed by a home rule charter pursuant to this constitution. (3) "Revenue neutrality" means when certified sales and use tax definitions are aligned with the state's or local taxing jurisdiction's sales and use tax base, the result is no more than a de minimis change in tax revenue for the respective state or local taxing jurisdiction. (4) "Sales and use tax base" means the goods or services subject to sales or use tax and the goods or services exempted from sales or use tax as set forth in the Colorado Revised Statutes and any law, rule, ordinance, or resolution of a local taxing jurisdiction. (5) "Sales and use tax definitions" means only those definitions necessary for defining the sales and use tax base of the state or any local taxing jurisdiction and does not include definitions for terms that address administrative decisions reserved to the state or local taxing jurisdictions. (6) "State administrative procedure act" means the "State Administrative Procedure Act" located in article 4 of title 24, Colorado Revised Statutes, or such successor act. (7) "Streamlined sales and use tax agreement" means the written agreement produced and administered by the streamlined sales tax governing board to simplify and modernize sales and use tax administration in participating states. (8) "Streamlined sales tax governing board" means the nonprofit corporation streamlined sales tax governing board, inc., created for the purpose of administering and operating the streamlined sales and use tax agreement, as amended, to simplify sales and use tax collection and administration by retailers and participating states. Section 2. Colorado commission on uniform sales and use tax definitions - creation - appointment - term. (1) The Colorado commission on uniform sales and use tax definitions is hereby created in the department of revenue, and consists of seven members as follows: (a) The executive director of the department of revenue or his or her designee; (b) One member who represents state government appointed by the governor with the consent of the senate; (c) Two members who represent Colorado's municipalities appointed by the governor from nominations provided by a statewide association of municipal governments with the consent of the senate; (d) One member who represents Colorado's counties appointed by the governor from nominations provided by a statewide association of county commissioners with the consent of the senate; and (e) Two members who represent Colorado's business interests appointed by the governor from nominations provided by statewide associations that represent Colorado businesses with the consent of the senate. (2) The governor shall make the appointments specified in subsection (1) of this section no later than February 16, 2015. The governor shall initially appoint three members for two-year terms and four members for four-year terms. Thereafter, each member must be appointed for four-year terms. (3) Members must have professional experience in sales and use tax. (4) Members serve at the pleasure of the governor who may appoint a replacement or fill any vacancy to serve for the unexpired term of any member subject to, where applicable, the nomination process specified in subsection (1) of this section and subject to the consent of the senate. (5) The commission shall meet as necessary and the department of revenue shall provide staff support to the commission. (6) The commission shall make its decisions by majority vote except where specifically indicated otherwise. Section 3. Duties of the commission. (1) The commission shall: (a) Certify as specified in subsections (2) and (3) of this section all definitions necessary to establish a comprehensive body of statewide uniform sales and use tax definitions that the state and local taxing jurisdictions shall use; and (b) Serve as the sole nonjudicial source of official guidance regarding the certified sales and use tax definitions as specified in subsection (5) of this section. (2) (a) The commission shall, no later than January 1, 2016, review and certify the recommended sales and use tax definitions in the streamlined sales and use tax agreement amended through October 30, 2013, as specified in subsection (3) of this section. If a sales and use tax definition in the streamlined sales and use tax agreement amended through October 30, 2013, includes options that a legislative body may select, the commission shall make such selections as are necessary to meet the requirements of subsection (3) of this section. If the commission finds sufficient uniformity among the state and local taxing jurisdictions for an existing definition, then the commission shall review, make any necessary changes subject to subsection (3) of this section, and certify the existing sufficiently uniform sales and use tax definition instead of the streamlined sales and use tax agreement definition. Such certified sales and use tax definitions shall be promulgated as rules pursuant to the state administrative procedure act, except that such rules shall be permanent unless modified pursuant to this article, and shall not be subject to the rule review process set forth in law. (b) If a sales and use tax definition is missing from the streamlined sales and use tax agreement amended through October 30, 2013, that the state or any local taxing jurisdiction needs for its sales and use tax base, the commission may review, make any necessary changes subject to subsection (3) of this section, and certify the sales and use tax definition used by the state or the local taxing jurisdiction pursuant to subsection (6) of this section. (c) If the streamlined sales tax governing board adopts a new sales and use tax definition or adopts changes to existing sales and use tax definitions certified as specified in paragraph (a) of this subsection (2), the commission shall review the new sales and use tax definition or the changed sales and use tax definition and shall determine whether or not to certify such new or changed definition. If the commission decides to certify such new or changed definition, the certification must be accomplished as specified in subsections (3) and (6) of this section. (d) The state or any local taxing jurisdiction may make requests to the commission for additional certified sales and use tax definitions or may seek preapproval of a new sales and use tax definition from the commission. Any member of the general assembly or the executive director of the department of revenue may make requests pursuant to this paragraph (d) on behalf of the state. A local taxing jurisdiction may make requests pursuant to this paragraph (d) by resolution. Requests must be submitted in writing as determined by the commission. If the commission determines that such definition is necessary, then such definition must be certified as specified in subsection (3) of this section and promulgated as specified in subsection (6) of this section. (3) The commission shall certify a sales and use tax definition with sufficient clarity, precision, and adaptability necessary to permit the use of such definition by the state or local taxing jurisdictions. (4) If the commission determines that a previously certified sales and use tax definition needs modification, such certified sales and use tax definition may be modified and recertified by the commission pursuant to subsections (3) and (6) of this section, but only upon an affirmative vote of at least six members of the commission. (5) The commission may issue official guidance regarding the certified sales and use tax definitions in the form of either an interpretive opinion or an interpretive rule. An interpretive opinion is issued when a requestor submits specific facts and asks how certain certified definitions would apply to those facts, similar to a private letter ruling issued by the Colorado department of revenue upon written request of a taxpayer, except that such interpretive opinion is not confidential. An interpretive rule is issued when a requestor seeks clarification of a certified definition. An interpretive rule applies more generally, similar to rules issued by the department of revenue to clarify statutory language. Official guidance must be promulgated as specified in subsection (6) of this section. The commission shall act on requests for official guidance within a reasonable period of time and under guidelines and procedures as set forth by the commission. The commission may determine that it will not issue official guidance. (6) Certified definitions, except the initial body of certified definitions described in paragraph (a) of subsection (2) of this section, and official guidance must be promulgated as rules by the commission pursuant to the state administrative procedure act. (7) No ex parte material or representation of any kind may be received or considered by the commission. Section 4. Application of uniform definitions to state and local tax levies. (1) (a) The state and any local taxing jurisdiction shall use the certified sales and use tax definitions and any official guidance relating thereto that the commission promulgates pursuant to section 3 (3) of this article for purposes of administering and levying its sales and use tax. Sales and use tax definitions certified and promulgated pursuant to section 3 of this article must be adopted as specified in this subsection (1) by the state and local taxing jurisdictions without modification. (b) While endeavoring in good faith to maintain overall revenue neutrality, the state and local taxing jurisdictions shall align their sales and use tax base to the certified sales and use tax definitions as follows: (I) For the definitions certified as described in section 3 (2) (a) and (2) (b) of this article, within a period not to exceed thirty-six months from certification of such definitions; and (II) For the definitions certified as described in section 3 (2) (c) or (2) (d) of this article, within a period not to exceed eighteen months from certification of such definitions. (c) Should the state or any local taxing jurisdiction fail to align their sales and use tax base to the certified sales and use tax definitions as described in paragraph (b) of this subsection (1), any person may bring an action only in the Denver district court to compel compliance with this provision and shall, if successful, be entitled to an award of reasonable attorney fees and costs by the court. (2) If the state or any local taxing jurisdiction adjusts its sales and use tax base so that a new sales and use tax definition is required, the state or local taxing jurisdiction may either: (a) Enact a sales and use tax definition, which shall take effect on whatever date is specified in the law and which the commission shall subsequently review and determine if certification is necessary as specified in section 3 (2) (d) of this article; or (b) Seek preapproval as specified in section 3 (2) (d) of this article of a new sales and use tax definition from the commission prior to adjusting its sales and use tax base. (3) Except as explicitly provided, this article does not limit, alter, or diminish the plenary power of the state or a local taxing jurisdiction's constitutional power to control the levying and collecting of a sales and use tax or to control its sales and use tax base. SECTION 2. Each elector voting at said election and desirous of voting for or against said amendment shall cast a vote as provided by law either "Yes/For" or "No/Against" on the proposition: "Shall there be an amendment to the Colorado constitution concerning statewide uniform sales and use tax definitions, and, in connection therewith, creating a commission on uniform sales and use tax definitions that will certify the statewide sales and use tax definitions and will provide official guidance regarding the definitions, and specifying that the state and any local taxing jurisdictions shall use the certified sales and use tax definitions and official guidance for purposes of administering and levying its sales and use tax?" SECTION 3. The votes cast for the adoption or rejection of said amendment shall be canvassed and the result determined in the manner provided by law for the canvassing of votes for representatives in Congress, and if a majority of the electors voting on the question shall have voted "Yes/For", the said amendment shall become a part of the state constitution.