WPC  4@:pL# ltyQM3 Frc⪝9ǜ2)+kl O>O![hFf<>|hBE_% 5Eg0n-)R\E5OƲ!"0 s#s#  2.Trustedthirdparties(TTPs)wouldcalculate/remittax(TTPapproach). c>!q!P  s# s#    c  0   `  c8""0 s#s#  Taxpayerswouldbesubjecttojointauditsonbehalfofallstates. c8"k",  s# s#    c     c'#"0 `   Softwarewouldbeusedtodeterminethesitusofsalesandstateandlocaltaxrates. c'#N# ` s#` s#    c  0   `  c$"0 s#s#  StateswouldcertifysoftwareandprovideitwithoutchargetovendorsorĢTTPs. c$G$  s# s#    c  0   `  c%"0 s#s#  Aĕ holdharmlessclausewouldprotectvendorswhorelyonthesoftware. c%D%p  s# s#     Inadditiontotheseĕ primaryproposalsthereareseveralĕ fallbackpositionsthatsomemayfindmorepoliticallyrealistic.TheprimaryproposalsprovideabenchmarkagainstwhichtojudgeotherproposalstheACECmayreceive,aswellasthefallbackpositions.Becausetheproposedsystemisvastlysimplerthanconceptuallydefensiblealternatives,theneedforsimplificationmaydrivedecisionmakerstowardit,despitetheconventionalwisdomthatitispoliticallyunrealistic. III.TheProposals:DetailedDescriptionandAnalysis ۭ t  A.TheTaxBase:General ۭ P   ProposalA. Allstateswoulddefinethetaxbaseidentically.Allsalestohouseholdsinastatewould ,| besubjecttotax,whethersoldbylocalmerchantsorremotevendors,unlesstherewereagreementamongallstatestoexemptcertainitems(e.g.,prescriptiondrugs).Servicesandintangibleproductswouldbesubjecttotax,whenboughtbyhouseholds.Specialtaxesontelecommunicationswouldbeeliminated.  Rationale.Thetaxbasewouldbedefineduniformlyinallstatestosimplifycomplianceand  administration.Remotevendorswouldneedtodealwithonlyonedefinitionofthetaxbase,insteadof46(ormore,consideringlocaltaxes).Allsalestohouseholdswouldbetaxedtopreventerosionofthetaxbase, X simplifythesystem(e.g.,noneedtodistinguishtaxableandexemptfoodorclothing),avoiddistortionofconsumerchoices,andtreatthosewhobuyfromlocalmerchantslikethosewhobuyfromremotevendors.Theenormousdifficultyingainingagreementonwhatshouldbeintheuniformtaxbasesuggestsacceptanceoftheconceptuallycorrectsolution:taxingallconsumptionspending.Worthspecialnoteistheavoidanceof indistinctdistinctions,suchasthosebetweencertaintangibleproducts(e.g.,shrinkwrappedsoftware,musicCDs,andvideocassettes)andvirtuallyidenticalintangibleproducts(software,music,andvideos)downloadedfromtheInternet.Suchdistinctionscomplicatecomplianceandadministrationandhavenoeconomicjustification.Includingservicesandintangibleproductsinthetaxbasewouldallowreductionoftaxrates.ĦThereisnojustificationforspecialtaxesontelecommunications.  Discussion.Problemswiththeproposalareprimarilypolitical.Inadditiontothelossofstatefiscal '@#) sovereigntyimpliedbyauniformtaxbase,therewouldbeseriousoppositiontotaxationofservicesandintangibleproducts,eveninarevenueneutralcontext.  FallbackA1. Statesmightbeallowedtochoosetheirowntaxbases,butberequiredtodefinewhat *%, isorisnotbesubjecttotaxidentically.(Conceptuallytherewouldbeaĕ menuofcommonlydefinedproducts,besidewhicheachstatewritesĕ taxableorĕ exempt.)Computerizedĕ lookuptableswouldindicatewhether @,'. eachproductistaxedineachstate.Barcodescouldindicatetheproductcategoryintowhichmosttangibleproductsfall.Tobepractical,thereshouldbeonlyafewwelldefinedproductcategoriesĕ"perhapsnomorethanadozen.Localjurisdictionsshouldnotbeallowedtodeviatefromthestatetaxbase.  Rationale.Theprimaryproposalinvolvesaradicaldeparturefrompresentpractice,inwhichstates D choosetheirowntaxbases.Thefallbackcombinesgreateruniformitythancurrentlawwithgreaterstatefiscalsovereigntythantheprimaryproposal.  Discussion.Amenuofpotentiallytaxedproductsmightcontainabout10,000productsĕ"moreor  ( fewer,dependingonthedegreeofaggregationofproducts.Lookuptableswith460,000cells(oneforeachĦof10,000itemsin46states)areconceptuallyfeasible,butperhapsimpractical;theywouldcertainlybeimpracticalforcatalogsalesifthepurchaserdesirestoknowthetaxduewhenplacinganorder.Unlesscategorieswerechosenextremelycarefully,ĕ indistinctdistinctionsandattendantproblemswouldremain.  FallbackA2. ItmaybepoliticallyexpedienttoprovideanexemptionforInternetaccesspurchasedby $t  households.(PurchasesofInternetaccessbybusinesseswouldbeexemptundertheconceptuallycorrecttaxtreatmentofbusinesspurchases,consideredbelow.)  Discussion.ThereislittlejustificationforexemptingInternetaccessbyhouseholds.Anexemption   wouldcomplicatecomplianceandadministration,becauseInternetaccessiscommonlybundledwithother(presumablytaxable)products,andhaveadversedistributionalimplications. B.TheTaxBase:ExemptionofBusinessPurchases ۭ ,|   ProposalB. Theconceptuallycorrectwaytotreatbusinesspurchasesisforallstatestotreatthem X identically,byexemptingthem.(ExemptionachievesthesameresultasunderthevalueaddedtaxesusedintheEuropeanUnion,wherebusinessesreceiveacreditfortaxpaidonpurchases.)Auniformexemptioncertificateshouldbeusedthroughoutthenation.  Rationale.Uniformtreatmentofbusinesspurchaseswouldsimplifycomplianceandadministration; | remotesellerswouldneedtoknowonlyonesetofrules,not46.(Theĕ uniformexemptioncertificatedraftedbytheMultistateTaxCommissionisnotuniform,becausestatelawsarenotuniform.)Sellerswouldnotneedtojudgetheeligibilityoftheircustomerstomaketaxfreepurchases,dependingontheuseoftheproduct,asnow.Exemptionofbusinesspurchaseswouldeliminatedefectsofthepresentsystem:discriminationamong < products,distortionofproductiondecisions,incentivesforverticalintegration,andataxcostthatcannotberecoveredonexports.Whileexemptionsforbusinesspurchases(initiallyavailableonlyforresale)havebeenexpandedovertime,theyremainfarfromcomprehensive.Thusthepurchasesofsomesectorsaretaxed,whilethoseofothersareexempt.Theproposalwouldeliminateallsuchdiscrimination.  Discussion.Problemswiththeproposalareprimarilypolitical.Inadditiontothelossofstatefiscal 8   sovereignty,eliminationofallbusinesspurchasesfromthetaxbasewouldnecessitateincreasingtaxratestomaintainrevenueinarevenueneutralcontext.  FallbackB. Statescouldcontinuetodecidewhetherornottoexemptvarioustypesofbusiness "# purchases,butberequiredtodefinethevarioustypesofbusinesspurchasesthatmightbeexemptidentically.Ħ(Conceptuallytherewouldbeamenuofcommonlydefinedtypesofbusinesspurchases,besidewhicheachstatewritesĕ taxableorĕ exempt.)Computerizedĕ lookuptableswouldindicatetaxtreatmentineachstate.Tobepractical,thereshouldbeonlyafewwelldefinedcategoriesĕ"perhapsnomorethanahalfdozen.Useof directpaybybusinesscustomersshouldbeexpanded.  Rationale/discussion.Thisalternativeachievesmuchĕ"butnotallĕ"ofthesimplificationofthe 'H#) conceptuallyidealproposal,withoutasmuchlossofstatesovereigntyorreductionoftaxbases.Theadverseeconomiceffectsofthepresentsystemwouldremain,buteachstatewouldhavetheoptionofexemptingallcategoriesofbusinesspurchasestoattractbusiness.Directpay,whichwouldnotbeneededundertheprimaryproposal,wouldreducetheneedforvendorstodeterminewhethersalestobusinessesareforexemptuses.í D,'.  C.Sourcing/SitusingofSalesandLocalTaxRates ۭ    Thesitusofremotesalesdeterminesthelocaltaxratetobeappliedandthejurisdictionthatreceivestaxrevenuefromasale.Itisthusconvenienttoconsiderlocaltaxratestogetherwiththesitusofremotesales.  Prefatorydiscussion .Statesalestaxesarebasedonthedestinationofsalesĕ"orwouldbe,ifremote D salesweretaxedandbusinessinputswereexempt.Unlikeoriginbasedtaxation,destinationbasedtaxationavoidsdistortionofthelocationofeconomicactivity.Moreover,privateconsumptionisgenerallyareasonableproxyfortheconsumptionofpublicservices.Theconceptuallycorrectwaytodeterminethesitusofremotesalesisthustoattributethemtothestateandlocalityofdestinationofthesale.  ProposalC .Softwarewouldbeuseda)todeterminethestateandlocaltaxratesthatshouldbeapplied   toremotesalesofparticularproductsandb)topreparethereportscontainingtheinformationneededbystatestochannelrevenuestotheappropriatelocaljurisdictions.Suchsoftwarewouldcontainrulestobeapplieduniformlyacrossthenationĕ"neededtodeterminethesitusofsalesnotinvolvingtangibleproducts(e.g.,forservicesandtelecommunications).  Discussion.Theproposalimplementsdestinationbasedtaxationandprovideslocalgovernmentswith 4  autonomyoverthetaxrate,whichwouldbeappliedtobothsalesbylocalmerchantsandremotesales.Severalqualificationsareappropriate.First,statesshouldcertifysoftwareandenactĕ holdharmlessrulestoprotectremotevendorsfromrelativelyminorandunintentionalerrorsresultingfromgoodfaithrelianceonsuchsoftware,includingthosethatresultfromthesoftwarevendorsfailuretoupdateratetables.(Localgovernmentsshouldbeartheburdenofinformingprovidersofsoftwareofchangesinrates.)Second,suchsoftwarecanbeusedonlyforsalestocustomersthatarewillingtoallowthevendortocalculatethetaxandaddittothebill.Aspecialregimemaybeneededforthosewhoremitbycheckormoneyorderwhenplacinganorder.Itmightbebasedontheĕ onerateperstatefallbackpositiondiscussedbelow.  FallbackC. Businessrepresentativesarguethatremotesalesshouldbeattributed( sourced)only  tothestatelevel,claimingthatitisimpossibletodetermineaccuratelythelocalsitusofremotesales.Localgovernmentscouldsetsalestaxrates,buttherewouldbeonlyoneusetaxrateperstate,andstateswouldbe \ responsibleforallocatingrevenuefromusetaxamongtheirlocaljurisdictions.  Discussion.Thefallbackwouldretainlocalautonomyoverlocalsalestaxrates,buteliminate d autonomyoverlocalusetaxrates.Localjurisdictionswouldreceiverevenuesfromtaxesonsalesbylocal @ merchants,butdependonsharingofrevenuesfromthestatewidelocalusetax.Thisarrangementwouldallowlocaljurisdictionstomeettheirobligationsunderdebtcovenantsthatdedicaterevenuesfromlocalsalestaxtodebtservice.Localgovernmentsimposingsalestaxrateswellbelowthestatewidelocalusetaxratemightcompensatelocalresidentsforexcessusetaxonremotepurchases.Wherelocalsalestaxratesexceedthestatewideusetaxrate,discriminationagainstlocalmerchantswouldremain. D.ĢUnallocableSales ۭ !D"   ProposalD. Remotesalesthatcannotbeallocatedtoastate(becauseremotevendorsdonotknowthe " # locationofabuyerofdigitizedcontent)andremotesalesthatfallbelowthedeminimisthreshold(seebelow)wouldbesubjecttoanationalĕ substituteusetax,revenuesfromwhichwouldbesharedwiththestates,perhapsonthebasisofestimatedconsumerspendinginthestate.  Rationale/discussion.ItisnotsatisfactorytoattributeĢunallocablesalestothestateoforiginofremote D&!' commerce;doingsocreatesanincentivetolocateoperationsinstateswithnosalestax.Billingaddressescanbeusedtodeterminethelocationofsomecustomers,butnotall.Theneedforthenationalsubstituteusetaxisoneadvantageofhavinganationallyuniformstatesalestaxbase,whichwouldbeusedasthebaseofthattax.Statesthathavenosalestax(orrateswellbelowthenationaltax)couldrefundthenationaltax(orthedifferenceinrates)totheirresidents.Technologicaldevelopmentsmaymakethisprovisionunnecessary.ҭ +&.  ڭ  l+&- E.AdministrativeAspects ۭ    Administrationofstatesalesandusetaxesshouldbesimplerandmoreuniformthroughoutthenation.ĦTwooptionsdeserveattention.  ProposalĢE1:theBaseStateApproach. Taxpayerswouldcollectusetaxinallstateswheresales D exceeddeminimisamounts.Buttheywouldfileasingleformtoregisterinallstatesandanothertopaytaxdueinallstates.Formsmightbefiledinthestateinwhichthefirmhasitscommercialdomicile(theĕ basestate)orwithamultistateagency.Thebasestateormultistateagencywouldforwardrevenuestostateswheresalesoccur,whichwoulddividerevenuesamonglocaljurisdictions,onthebasisofinformationprovidedbytaxpayers.Therewouldbejointauditsonbehalfofallstatesandacommonappealsprocess.  Discussion.Taxauthoritiesineachstatewouldneedtoknowthetaxlawsofallotherstates.This p   systemwouldthusworkbestiftherewereacommondefinitionofthetaxbase.Itwouldnotworkintheabsenceofacommonmenuofpotentiallytaxableproducts.  ProposalĢE2:UseofTrustedThirdParties. Thisapproachwouldshiftcompliancefromthevendor T  toatrustedthirdparty(TTP).TheĢTTPwouldcalculatetaxandremitittostateswheresalesaremade,withanindicationofthedivisionofrevenuesamonglocaljurisdictions.  Discussion.FurtheranalysisisneededtodeterminewhetherthebasestateapproachortheĢTTP   approachismorepromising. F.ZerocostCompliance ۭ 0   ProposalF. ImplementationofadestinationbasedsalestaxrequiresremotevendorsorĢTTPstouse  \ sophisticatedandexpensivesoftware.Stategovernmentsshouldprovidethesoftwareatnocost.(Thereisprecedent.WhenCanadaintroducedtheVATitsubsidizedpurchaseofnewcashregisters.)UnderthebaseѺstateapproachvendorsdiscountsshouldbesettodefraycostsofcompliance.(TheymightnotbeneededundertheĢTTPsapproach.)Thesecostscanbequitehigh,asapercentageofrevenues,forsmallvendors. G.DeMinimisRule ۭ 8   ProposalG .Itmaybedesirabletohaveademinimisrule;vendorswithtotalremotesalesbelowa d certainlevelwouldberelievedoftheneedtoparticipateinthebasestatesystemorutilizeaĢTTP  Discussion.Fromaneconomicpointofview,makingsalesinastate,ratherthanphysicalpresence,   shouldbethetestofnexus.Yetitmaybeunreasonableoruneconomicaltorequirefirmswithsmallremotesalestoparticipateintheregularsystem.(Theremightberelativelylittleneedforademinimisruleifalltheprimaryproposalsmadeherewereadopted.) IV.ConcludingRemarks ۭ !l!   Becausetheproposalsmadehereformapackage,commentsontheentirepackageareappropriate. A.TheIntegrityoftheProposals ۭ #$   Takentogethertheprimaryproposalswouldradicallysimplifystatesalesandusetaxesandmakeitreasonabletoimposeanexpandeddutytocollectusetax.Ifproposedchangesareomittedorreplacedbythefallbackpositions,therewouldbesubstantiallylesssimplificationĕ"somuchlessthatanexpandeddutytocollectmightbecomequestionable.  Iftherewereamenuoftaxableproducts,insteadofauniformandcomprehensivebase,thesoftwareneededtoimplementusetaxeswouldbemorecomplicatedandexpensive,classificationofproductswouldbemorecontroversialandonerous,statecertificationofsoftwareandaĕ holdharmlessprovisionwouldbeproblematical,thebasestateapproachanduseofĢTTPsmightbeinfeasible,andthedeminimisthresholdwouldneedtobehigher.Theseverityofproblemswoulddependonthelevelofaggregationofthemenu.Moreover,itisunlikelythattechnologicalneutralitywouldbemaintainedinconstructingthemenu.Iftherewerenoteven H,'. auniformmenufromwhichstateswouldchoosetheirtaxbase,itseemsunlikelythatenoughsimplificationcouldbeachievedtojustifyanexpandeddutytocollect. B.TheQuestionofStateSovereigntyandLocalAutonomy ۭ D   Somewillattacksomeoftheseproposals(e/.g.,forexampletheproposalforauniformtaxbase)asanunwelcomeintrusiononstatefiscalsovereignty.Thatviewlosessightofthelargerpicture.Thestatesovereigntythatwaspossiblewhenlocalmerchantssoldprimarilytangibleproductsalmostexclusivelytolocalcustomersisnolongerpossible,oratleastnotarealisticalternative,asitimpliesenormouscomplexityforremotevendorsandthusthelegalinabilitytotaxremotesales,includingthosemadeinelectroniccommerce.Theproposalsrepresentanattempttocraftacompromisebetweentheneedforrevenueandthepowertosetstatetaxratesĕ"arguablyhigherordersofstatesovereigntyĕ"andcontroloverthetaxbase,arguablyalessimportantaspectofsovereignty.Theyalsoattempttoretainlocalautonomyoverlocalsalesandusetaxrates. C.TheNeedforFederalLegislation ۭ ,    Intheoryitmightbepossibleforthestatestoactcooperativelytoimplementasystemsuchasthatproposedhere,withoutfederallegislation.Iftheydid,theSupremeCourtmighteliminatethephysicalpresencetestofnexus.Infact,historydoesnotinspireconfidencethatthestateswouldactinthisway,andtheCourtmightnotrespondaspredicted,eveniftheydid.Inanyevent,therewouldbeunacceptableuncertainty.Thusitseemsalmostcertainthatfederallegislationwouldberequiredtoimplementtheproposalsmadehere.Ratherthanrequiringthatstatesadopttheproposals(theĕ stickapproach),legislationcouldallowanexpandeddutytocollectonlyforstatesthatadopttheproposals(theĕ carrotapproach). ڲ   %&ANNEX  ConformitywithACECCriteria ò6q  Eachofthe18criteriaoftheACECisstatedasaquestionthatisansweredbelow. Simplification ۭ    1.Howdoesthisproposalfundamentallysimplifytheexistingsystemofsalestaxcollection(Someexamplesmaybe:commondefinitions,singlerateperstate,clarificationofnexusstandards,andsoforth)?  A.Theproposalswouldprovideauniformandcomprehensivedefinitionofthetaxbase,uniformandcomprehensiveexemptionofbusinesspurchases,anationallyuniformexemptioncertificateforbusinesspurchases,useofcertifiedsoftwarewithaholdharmlessclause,jointauditonbehalfofallstates,clearstandardsfornexus,andperhapsademinimisrule.Administrativeprocedures(registration,filingofreturns,andpayment)wouldallowthetaxpayertodealwithasinglestateoragencyorwithatrustedthirdparty,not46states.  2.Howdoesthisproposaldefine,distinguish,andproposetotaxinformation,digitalgoods,andservicesprovidedelectronicallyovertheInternet?  A.Theproposalswouldtaxtaxinformation,digitalgoods,andservicesprovidedelectronicallyovertheInternetlikeallothergoodsandservices.Theywouldnotdefineordistinguishsuchproductsfromotherproducts.  3.Howdoesthisproposalprotectagainstonerousand/ormultipleaudits?  A.Theproposalprovidesfortheconductofjointauditsonbehalfofallstates.ҭ  |'"+  Taxation ۭ ($,   4.DoesthisproposalimposeanytaxesonInternetaccessornewtaxesonInternetsales?  A.TheconceptuallyidealproposalwouldnotdistinguishbetweenInternetaccessorInternetsalesandsalesofothergoodsandservices.ItwouldnotimposeanynewtaxesonInternetsales.í +0'0   5.Doesthisproposalleavethenettaxburdenonconsumersunchanged?(Doesitimposeanobligationtopaytaxeswheresuchanobligationdoesnotexisttoday?Doesitreduceorincreasestateandlocaltelecommunicationtaxes?Doesitreduceorincreasetaxes,licensingfees,orotherchargesonservicesdesignedorusedforaccesstooruseoftheInternet?)  A.Theproposalsareintendedtoberevenueneutral.Theyareintendedtoincreasecollectionofusetaxesonremotesales,whicharelegallydue,butwidelyevaded.Theywouldincreasetaxesonservicesandintangibleproductsthatarenowexemptandreducethemonsalestobusinessandontelecommunications.TheproposalwouldendthepresentmoratoriumontaxesandsimilarchargesrelatedtouseoftheInternetandtaxInternetaccesslikeotherproducts.Ratesonproductsthatarenowsubjecttotaxwouldbereducedorincreased,dependingonwhethertotaltaxablesaleswereincreasedorreduced.  6.Doestheproposalimposeanytax,licensingorreportingrequirement,collectionobligationorotherobligationorfeeonpartiesotherthanthosewithaphysicalpresenceinaparticularstateorpoliticalsubdivision?  A.Theproposalsimposereportingandcollectionobligationsonremotevendorswithremotesalesinexcessofademinimisamount,withoutregardtophysicalpresence.Theyimposetaxesonthosewithnophysicalpresenceonlytotheextentthattheybroadenthetaxbase(e.g.,bytaxingservices),iftheyexceedthedeminimisstandard.  7.Whatfeaturesoftheproposalwillimpacttherevenuebaseoffederal,state,andlocalgovernments?  A.Theproposalswouldnotaffecttherevenuebaseofthefederalgovernment.Theywouldprotecttherevenuebaseofstateandlocalgovernmentsfromerosionbythegrowthofelectronicandotherremotecommerce.Theyareintendedtoberevenueneutralonastatebystatebasis,butcouldentailrealignmentoftaxburdens,byincreasingtaxationofservicesandintangibleproducts,reducingtaxationofbusinessinputs,andimposingadutytocollectusetax. BurdenonSellers ۭ p   8.Doesthisproposalremovethefinancial,logistical,andadministrativecomplianceburdensofsalesandusetaxcollectionsfromsellers?Doestheproposalincludeanyspecialprovisionswithrespecttosmall,medium-sized,orstart-upbusinesses?  A.Theproposaltosimplifythesalesandusetaxsystem(viaauniformandcomprehensivedefinitionofthetaxbase;uniformandcomprehensiveexemptionofbusinesspurchases;anationallyuniformexemptioncertificateforbusinesspurchases;registration,filingofreturns,andpaymentoftaxwithasinglestateoragencyoruseofĢTTPs;useofcertifiedsoftwarewithaholdharmlessclause;jointauditonbehalfofallstates;clearstandardsfornexus;andademinimisrule)wouldreducecomplianceburdenssignificantly,especiallyforsmallbusinesses.Realisticvendorsdiscountswouldfurtherrelievethefinancialburdenofcompliance. Discrimination ۭ  T#   9.Doestheproposaltreatpurchasersoflikeproductsorservicesinaslikeamanneraspossiblethroughtheimplementationofapolicyorsystemthatdoesnotdiscriminateonthebasisofhowpeoplebuy?  A.Theproposalseliminateallsuchdiscrimination.0   10.Doestheproposaldiscriminateagainstout-of-stateorremotevendorsoramongdifferentcategoriesofsuchvendors?ĦA.Theproposalswouldnotdiscriminateagainstoutofstatevendorsoramongsuchvendors. s#s#  International ۭ @&!+   11.HowdoesthisproposalaffectU.S.globalcompetitivenessandtheabilityofU.S.businessestocompeteinaglobalmarketplace?  A.Byeliminatingalltaxonbusinesspurchases,whichcannotberecoveredwhenproductsareexported,theproposalwouldincreaseU.S.competitiveness.Ò   12.Canthisproposalbescaledtotheinternationallevel?ĭ *<&1   A.ExceptforsomeoftheprovincesofCanada,nootheradvancedcountryhasasystemofretailsalestaxes; allotheradvancedcountriesemploythevalueaddedtax(VAT).TheCanadiansystemsuffersfrommanyofthesamedefectsastheU.S.system.TheVATemployedintheEuropeanUnion(EU)isalreadystructuredtoachievemostoftheobjectivesoftheseproposals,orisbeingmodifiedtodoso(e.g.bytaxingserviceswheretheyareconsumed).  13.Howdoesthisproposalconformtointernationaltaxsystems,includingthosethatarebasedonsourceratherthandestination?IsthisproposalharmonizedwiththetaxsystemsofAmericastradingpartners?  A.Bytaxinghouseholdconsumptiononadestinationbasisandexemptingtaxonallbusinesspurchases,theproposedsystemistotallyconsistentwiththevalueaddedtaxesimposedintheEuropeanUnion.Theonlysalestaxintheworldthatisimposedonthebasisofsourceororigin,insteadofdestination,theBrazilianstateVAT,hasbeenthesubjectofcriticismandcontroversysinceitsinceptionin1968;theBraziliancongressiscurrentlydebatingapossibledestinationbasedreplacement.AssertionsthattheEUisshiftingtosourcebasedtaxationaregroundless. Technology ۭ (    14.Istheproposaltechnologicallyfeasibleutilizingwidelyavailablesoftwaretoenabletaxcollection?Ifso,whataretheinitialcostsandthecostsforrequiredupdates,andwhoistobearthosecosts?  A.Theproposalutilizesextantsoftwarethatcouldbemadewidelyavailableatnocosttovendors(softwareattributinglocationstoparticularjurisdictionsandapplyingtheappropriatetaxrates)orsoftwarethatcouldeasilybewritten(softwareneededtoimplementthebasestateallocationofrevenues,whichcouldbepatternedafterthatusedtoimplementtheInternationalFuelsAgreement). Privacy ۭ d   15.Doestheproposalprotecttheprivacyofpurchasers?  A.TheproposalutilizesexistingproceduresorĢTTPstocalculatetaxliabilities.ĢTTPswouldbecontrolledbyconfidentialityagreements. Sovereignty/LocalGovernmentAutonomy ۭ H   16.DoesthisproposalrespectthesovereigntyofstatesandNativeAmericans?  A.Inordertoprotecttherevenuesofstateandlocalgovernments,theproposalsimpingeonthesovereigntyofthestates,byrequiringadherencetoacommondefinitionofthetaxbaseandcommonrulesfortheexemptionofpurchasesbybusiness.Inexchange,iteliminatesdiscriminationbetweentypesofproductsandagainstbusinesspurchases.Italsorequirescommonadministrativeprocedures(registration,filing,paymentoftax,etc.orrelianceonTTPs)andjointaudits.TotheextentNativeAmericanshavethesametaxingpowersasstates,theaboveanswersapply.ĦOtherwisetheproposalsdonotaffectthesovereigntyofNativeAmericans.  17.Howdoesthisproposaltreatlocalgovernmentsautonomyandtheirabilitytoraiseagreaterorlesseramountofrevenuesdependingontheneedsanddesiresoftheircitizens?  A.Theproposalsprotectthefiscalautonomyoflocalgovernmentsandthustheirabilitytoraisemoreorlessrevenue,byraisingorloweringsalestaxrates. Constitutional ۭ #4(   18.Istheproposalconstitutional?A.Theproposalsareconstitutional.UndertheConstitutiontheCongresshastheexpresspowertoregulateinterstatecommerce.TheSupremeCourthasrepeatedlyinvitedtheCongresstochangethetaxrules,ifitdoesnotliketheresultsofitsdecisions.Whilepartsoftheproposalaffectintrastatetaxation,itcanbearguedthattheseeffectsareanecessaryconcomitantoftheexerciseoftheInterstateCommerceClause.