Michigan Developments
Eric Rule,
Director of Governmental Affairs

Streamlined sales tax agreement needs ratification
MRA was successful in passing legislation in 2001 allowing Michigan to participate in a multi-state compact aimed at leveling the playing field between Main Street retailers and remote sellers. The project took another big step at a January 6-8 briefing for retailers held in Minneapolis, Minnesota.

Sponsored by Target Corporation, this three-day event brought participating states together to formally adopt an agreement outlining how tax collection and remittance will function. Now that the document is drafted, a minimum of 10 states must ratify the agreement to have it take effect.

Michigan will now begin the process of working to pass this legislation and bring much-needed tax fairness to brick-and-mortar businesses.

Budget deficit fixes discussed
The Michigan Education Association has been attempting to garner support from legislators and the public to place a sales tax on services in exchange for lowering the sales tax on items currently covered. While the sales tax would be lowered by 2 to 3 percent, services could encompass such things as oil changes, doctor visits, and haircuts. This could have the effect of raising revenue to the state by as much as $8 billion a year.

There have also been rumblings about a tax on advertising. Approaches like this have been attempted in other states over the years and have been met with strong resistance by retailers, automakers and the press in general.

Sikkema forms recycling task force
Senate Majority Leader Ken Sikkema (R-Wyoming) recently named a Republican Task Force to examine the current bottle bill and determine if it should be expanded to simply include more containers or changed to move toward a more comprehensive recycling approach.

Recent data indicate that while Michigan has been very successful in recycling upwards of 90 percent of the items covered under the deposit law, these materials only make up roughly 2 percent of the municipal solid waste stream in Michigan.

Update from Washington
James Goldberg,
MRA Washington Counsel

MRA and e-Fairness Coalition begin work
With the completion of the first round of work by the Streamlined Sales Tax Project (SSTP), MRA’s Washington Office and its allies in the e-Fairness Coalition have launched a series of meetings with key congressional staff members, educating them on the progress made to date in the effort to simplify state sales tax systems.

Participants of the SSTP have drafted a document that would provide for consistent definitions of products subject to sales tax and deal with many arcane, but highly important, issues related to sales tax collection and administration.

While work continues in the states to adopt the SSTP’s work, the effort in Washington will refocus on the passage of federal legislation to authorize states to require out-of-state vendors to collect state sales taxes. The SSTP document is seen as the simplification that Congress has indicated it will require as a trade-off for tax collection authority.

A federal ban on new taxes on Internet providers expires in November and it is generally believed that Congress will act to extend that moratorium, as it has once before. The extension bill is considered the best legislative vehicle for attaching an amendment dealing with sales tax collection.

There have already been bills introduced in the 108th Congress to make the moratorium permanent. One of the purposes of MRA’s meetings with congressional staff is to urge introduction of a sales tax authorization bill to establish a rallying point for retailers and real estate interests, who are the main proponents of sales tax equity.

IRS considers penalties for incorrect SSNs
The Internal Revenue Service is considering developing a system of civil penalties to be levied on employers who file incorrect Social Security numbers on employees. The plan comes in response to word that the Social Security Administration last year sent out more than 800,000 letters to employers advising them that some SSNs did not match employees names, that’s an 800 percent increase over the previous year.

MRA members can minimize their risk of being subjected to the planned penalty system by taking a number of actions:
• Ask each new employee for proof of his or her Social Security number. This will also partially comply with Immigration and Naturalization Service hiring requirements.
• Accurately record the employee’s number in payroll records; better yet, make a photo copy and retain it with the employee’s I-9 form.
• Remind workers to report names changes to the Social Security Administration and the employer.
• Use the Social Security Administration’s web-based Employee Verification Service prior to submitting Form W-2 at the end of the tax year. The EVS can be accessed at www.ssa.gov/employer/esohome.htm.

Copyright extension law upheld
The U.S. Supreme Court has given corporations such as Walt Disney Co., and AOL Time Warner a sweeping victory by upholding the right of Congress to extend the length of time that copyrighted cartoons, books, music and other material worth millions of dollars may be protected.

"We are not at liberty to second-guess congressional determination and policy judgments of this order, however debatable or arguably unwise they may be," Justice Ruth Bader Ginsburg wrote for the majority in the 7-2 decision.

The decision was a blow to Internet publishers and others who wanted to make old books available online, and use the likeness of Mickey Mouse and other old creations without paying royalties.

The U.S. Constitution provides a right of copyright protection for a "limited period," but Congress has repeatedly extended the period, which began with 14 years and was most recently changed in 1998 to the author’s life plus 70 years. Works owned by corporations are protected for 95 years.

Labor proposes ‘white collar’ overtime rules
MRA’s Washington Office plans to meet with officials at the federal office of Management and Budget to review a proposal by the Department of Labor to update rules dealing with overtime pay exemptions for "white collar" employees.

The rules haven’t been amended in more than 30 years. An effort was made by the Carter Administration to change them in 1980, but the proposal was rescinded by the then-incoming Reagan Administration. That was more than 20 years ago and, despite many announced plans to update the requirements, nothing has been done until now.

The "white collar" regulations provide that certain professional, executive and administrative employees need not be paid overtime if they work in excess of 40 hours per week. However, many of the definitions of which specific employees fit into what category are unclear and lead to problems, especially in the way retailers treat assistant store managers who have sales responsibilities as well as management duties.

Although the new rules are expected to significantly increase the salary threshold for "while collar" employees—the current test is $250 per week—the new test is expected to be realistic, insofar as retail employees are concerned.