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Discussion on Overall Cost of Compensation and Part 2 Compensation

Discussion on Overall Cost of Compensation and Part 2 Compensation. 9/28/09. Overall Costs of Compensation. Part 1 (credit card costs) and Part 2 (other costs) combined Look at potential cost compared to new money expected with remote collection authority

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Discussion on Overall Cost of Compensation and Part 2 Compensation

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  1. Discussion on Overall Cost of Compensation and Part 2 Compensation 9/28/09

  2. Overall Costs of Compensation • Part 1 (credit card costs) and Part 2 (other costs) combined • Look at potential cost compared to new money expected with remote collection authority • Imperative to get Governors and Legislators involved in this issue • Estimates for FY 2011

  3. Existing Sales Tax Base • Survey of the states to get ’09 state and local sales and use tax revenue • Adjusted to ’11- 1.2% for ’10, 4.7% for ‘11 • Based on national estimates for Retail and Food Sales and Personal Consumption Expenditures

  4. Estimate of New Revenue With Remote Collection Authority • 3 Components • 2011 E commerce loss from Fox Study • 2011 Other remote commerce loss on Business to Consumer Sales • 2011 Other remote commerce loss on Business to Business Sales • Adjusted for Different Possibilities for the Small Seller Exception (still reviewing assumptions for cost of exception)

  5. Existing Vendor Compensation Policies and Payments • Used FTA data for current policies- updated by some states • Current vendor compensation payment information provided by states • Data is not yet complete

  6. Calculated Possible Vendor Compensation Costs • Calculation is compensation as a percent of expected state and local sales and use tax revenues for FY 2011 • .75% • 1.0% • 1.25% • 1.5%

  7. Calculations for all states where sufficient data was available • Separate Totals for Select States • Arkansas, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming

  8. New Revenue with Remote Collection Authority (Billions) Small Seller Except.All StatesSelect States $5 Million $10.3 $2.8 $1 Million $12.4 $3.4 $500,000 $14.1 $3.9 $250,000 $15.6 $4.3 $100,000 $17.5 $4.8

  9. Current Vendor Compensation Payments • All States (those that reported) • $869 million • .31% of total state and local sales and use tax revenue • Select States (those that reported) • $243.9 million • .25% of total state and local sales and use tax revenue • In some states, existing compensation payments can help with any new compensation requirement

  10. Possible Compensation Amounts Compared to New Revenue with Remote Collection Authority

  11. Net Compensation ComparisonIncludes Existing Compensation

  12. Part 2 Compensation • Objectives • Simple for Retailers • As uniform as possible • Can be easily administered by states • Account for complexities of individual states • Account for varying costs by the size of the seller • Can be enacted in states • relationship of cost to additional revenue • impact on existing compensation systems

  13. Simple for Retailers • Easy to calculate amount • Can be calculated each reporting period without having to do additional calculations • Consider the types of sellers that may be collecting and remitting with remote collection authority

  14. Uniform as Possible • As much uniformity for each state given the other objectives • Consider a small seller that may be required to remit in multiple states with remote collection authority

  15. Account for Differences in States • Reporting for Local Jurisdictions • 2nd rate on Food or Drugs • Clothing Threshold • Origin Sourcing? • Consider requiring states to provide additional compensation only to impacted sellers

  16. Account for Cost Differences by the Size of the Seller

  17. Options for Providing Additional Compensation to Small Sellers • x% up to first $x remitted each reporting period • number of tiers? • Size of Seller in Gross Sales • Prior Reporting Period • Concerns over fast growing companies, companies restructuring • Complexities in determining appropriate caps

  18. Can Be Enacted by the States • Relationship to New Revenue • Impact on Existing Compensation Systems • Current provisions vary in structure and amount • Difficult to fit uniform system into existing state vendor compensation provisions without creating “winners” and “losers” • Other Political Considerations

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