Supplemental letter on Multistate Tax Commission draft model uniform statute: October 18, 2005.

On October 18, 2005, Tax Executives Institute sent a supplemental letter on the Multistate Commission's Draft Model Uniform Statute. The letter follows TEI's September 27th testimony. These comments were prepared under the aegis of TEI's State and Local Tax Committee, whose chair is Janet M. Wilson.

Following up on Tax Executives Institute's testimony at the September 27, 2005, hearing on the Commission's Draft Model Uniform Statute on Reportable Transactions & Inconsistent Filing Positions, I am pleased to submit the following additional comments addressing the proposed amendment concerning nexus reporting. The proposed amendment seeks to impose a reporting obligation on any individual or entity that "regularly and systematically solicits business" in a State, but does not file an income tax return in that State. In essence, the proposed amendment seeks to codify the "nexus questionnaire" process used by many States, adding a penalty for failure to provide required information.

TEI has a significant interest in promoting sound tax policy, as well as the fair and efficient administration of the tax laws, at all levels of government. Because this proposed amendment is neither sound nor administrable, we urge the Commission to avoid including it in any proposed Model Uniform Statute on Reportable Transactions & Inconsistent Filing Positions.

TEI submits that the proposed amendment is not sound or administrable for the following reasons:

* Under the Commerce Clause, and in view of the U.S. Supreme Court's opinion in Quill v. North Dakota, requiring individuals and entities not having physical presence in the State to file a form with the tax agency is constitutionally suspect.

* The proposed amendment exceeds the purpose and scope of a draft model uniform statute on taxpayer disclosure requirements.

* The discretion given to tax agencies to change the manner and form or reporting, as well as add to the...