Sourcing Amendment

SST Governing Board

December 11, 2007

New Section 310.1

• Section 310.1 (A)– Allows states with local jurisdiction taxes to

elect to adopt alternative sourcing– Applies to TPP and digital goods– Does not affect ‘over-the-counter’ sales

• Section 310.1 (B)– Limited exception to Section 310 sourcing.– All conditions must apply

Section 310.1 (B) Conditions

1. Must be intra-state sale

2. Where products is received is pursuant to current provisions in Sec. 310

3. To apply origin sourcing, seller’s recordkeeping system must capture the location where the order is received

Section 310.1 (C)

• All states making this election must:1. All interstate sales continue to be

destination sourced2. Only sales tax where order is received

may be levied; no use tax due or refund available based on delivery location

3. State may not require recordkeeping system that determines where order is received

Sec. 310.1 (C) [Cont.]

4. No additional purchaser liability to state if tax paid based on point of delivery or where order is received– Purchaser may rely on written

representation of seller as to where order is received

– If no written representation, purchaser may rely on business records

Sec. 310.1 (C) [Cont.]5. Location where order is received is physical

location of seller operated by seller or seller’s employee– Is not where order may be subsequently accepted,

completed or fulfilled– ‘Ship from’ location cannot be used

6. State shall have process for granting direct pay– DP may not be limited to manufacturers or where

ultimate use is not known– State may establish reasonable threshold based

on total purchases

Sec. 310.1 (C) [Cont.]

7. If taxable services are sold with TPP or digital goods in single contract or transaction and billed on same statement, state must elect to either origin or destination source transaction to avoid sourcing parts of transaction to two different locations.

8. State shall inform GB of election to use Sec. 310.1 alternative sourcing.

Sec. 310.1 (D)

1. If state is in substantial compliance with other provisions and makes election under 310.1, it shall become an Associate Member– Must follow process in Article VIII

2. States making election will automatically become full members when three states have made this election and been accepted as associate members, but in no event prior to Jan. 1, 2009

3. Subsequent to three-state trigger, any state making election is eligible for full membership

New Sec. 604 - Compensation

• States making election, when becoming full member, shall provide reasonable compensation for incremental expenses incurred in establishing or maintaining a uniform origin sourcing system

Sec. 705 - Assoc. Members

• Extends Associate Membership from December 31, 2007 to July 1, 2009