MINUTES OF THE
SENATE Committee on Taxation
Seventy-second Session
May 8, 2003
The Senate Committee on Taxation was called to order by Chairman Mike McGinness, at 2:13 p.m., on Thursday, May 8, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4406, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Mike McGinness, Chairman
Senator Dean A. Rhoads, Vice Chairman
Senator Randolph J. Townsend
Senator Ann O'Connell
Senator Sandra J. Tiffany
Senator Joseph Neal
Senator Bob Coffin
GUEST LEGISLATORS PRESENT:
Assemblyman David E. Goldwater, Assembly District No. 10
STAFF MEMBERS PRESENT:
Rick Combs, Fiscal Analyst
Ardyss Johns, Committee Secretary
OTHERS PRESENT:
Dino DiCianno, Deputy Executive Director, Department of Taxation
Gaylyn J. Spriggs, Lobbyist, Nevada Taxpayers Association
Mary Lau, Lobbyist, Retail Association of Nevada
Christina Dugan, Lobbyist, Las Vegas Chamber of Commerce
Harvey Whittemore, Lobbyist, Nevada Beer Wholesalers Association c/o Bonanza Beverage, and Southern Wine and Spirits
Gary E. Milliken, Lobbyist, Distilled Spirits Council of the United States
Chairman McGinness:
We will open the hearing on Assembly Bill (A.B). 514. The legislative staff has put together an exhibit for us to follow along on A.B. 514 (Exhibit C. Original is on file in the Research Library.).
ASSEMBLY BILL 514 (1st Reprint): Provides for enactment of certain provisions that are necessary to carry out Streamlined Sales and Use Tax Agreement. (BDR 32-1292)
Assemblyman David E. Goldwater, Assembly District No. 10:
I am pleased to present to you today A.B. 514. I know you get a lot of people testifying on one-page bills they say are very easy yet they are amazingly complex. This is a multi-page bill seeming complex, but it is really fairly easy. This is a continuing effort of work I have done on a national level regarding remote and Internet sales and the erosion of our sales tax base on that transaction tax which is not collected. The Streamlined Sales Tax Project (SSTP) has been worked on with Dino DiCianno, Deputy Executive Director, Department of Taxation.
I started with this issue back in 1999 and identified it as a problem. It was estimated Nevada would be behind about $125 million by the year 2006 in uncollected sales tax because of remote sales. For this reason, the National Conference of State Legislatures formed an executive task force, of which I was a member. The task force created the SSTP, which gives states the ability to enter into interstate agreements making the collection of sales tax easier and allowing a transaction tax to be applied to remote sales.
My handout, “Streamlined Sales Tax Project in Nevada” (Exhibit D), dispels some of the myths. It is not a new tax, it is not a tax on the Internet, and Congress does not prohibit it. If you recall, last session we passed the enabling bill to allow Nevada to become a state participating in the SSTP. This bill is also what is required by the SSTP to allow Nevada to continue to be a participatory State and a voting member. It includes some uniform definition rules and it enables the Department of Taxation to engage in these negotiations. Mr. DiCianno, being our representative, can better explain the bill and what we are trying to do here. I would be remiss if I did not mention to you Assembly Committee on Taxation Chairman David Parks also wanted to be here and wanted me to convey how important this legislation is to him as well.
Chairman McGinness:
Are those states included in this SSTP going to be guaranteed part of the revenue? How important is it for us to get in on the ground floor?
Assemblyman Goldwater:
It is very important to be a voting member. Every state has its unique challenges. Nevada has some advantages and disadvantages when it comes to sales tax. For example, the state of Illinois has hundreds of taxing districts with a number of different rates. Nevada has very few taxing districts. There are definitional problems in some areas. Nevada has a disproportionate reliance on the sales tax relative to other states. Therefore, however the SSTP is crafted, it is essential for us to have a say.
Dino DiCianno, Deputy Executive Director, Department of Taxation:
I am the voting member in the SSTP for the State of Nevada, which has been participating in this project since the year 2000. What you have in front of you is a culmination of the original 35 participatory states within the project (Exhibit E. Original is on file in the Research Library.). What occurred in November 2002 was the final embodiment of the agreement, which is significant because Congress has charged the states with unifying all the tax language and providing retailers the ability to pay by such methods as credit cards and electronic funds transfers. That is what is contained in this particular bill. It is important for Nevada to become a governing State, which is what this legislation will do. It will provide Nevada the power to vote with respect to its own destiny and with respect to the collection and reporting of those taxes by remote sellers.
I think just as importantly, it levels the playing field. What I mean is if someone were to purchase something, no matter where they purchase it, a tax will be collected. All of the states will benefit from any kind of sales tax transaction nationwide.
What Nevada has to agree to is what is referred to as a centralized service provider. The centralized service provider will capture the information, reporting, and payment of the revenue of purchases over the Internet. They are developing what is called a matrix, which means each state would have to provide to the service provider an identifier to each particular taxing jurisdiction within this State. It will be done by what is referred to by the Post Office, as “ZIP + 4.” It is important for Nevada to become a governing state, and will enable us to be a participant in those discussions and negotiations with respect to hiring that service provider.
I do not believe Nevada wants California, New York, or somewhere else dictating to this State how the agreement should be established. Initially, California and New York were not original participating states. They basically hung on to the sidelines to see whether or not 35 states could get their acts together. Well, I can tell you, they did. California and New York are now in the process of instituting legislation to become a participating state.
Each state has one vote, which is why it is very important for Nevada to be a part of this. We will be treated on an equal basis along with all other states within the process. As you know, there are only five states not having a sales tax. Oregon’s and Montana’s legislatures are now looking at enacting a sales tax, which in and of itself will level the playing field with respect to purchases.
Senator Rhoads:
What about the Tax Freedom Act of 1998? Is it still binding?
Assemblyman Goldwater:
There is a good explanation of that myth in the packet I passed out (Exhibit D). The Tax Freedom Act of 1998 prohibits the creation of any new or discriminatory tax on the Internet. Sales tax is an existing tax. It is under the State’s jurisdiction. It does not touch the sales tax. Also, we will not start collecting remote sales tax right away. We will move a step closer towards enacting the provisions we need to begin collecting the tax we should be collecting.
Senator Rhoads:
How can you do that? If I buy something on the Internet at 8 p.m., is somebody going to be watching me?
Assemblyman Goldwater:
States will have about three different options of exactly how it will work, but it will be something like this: When a transaction occurs, depending on where you take delivery and what credit card you use, it will probably be run through an independent provider. Depending on a number of different things the SSTP will figure out for us, the tax will be collected and remitted to the appropriate taxing authority instantaneously. The taxes are paid and the State gets what it deserves.
If you want to get away from transactional taxes, then this is not important. That is one option this State has. We can get away from the sales tax and we all know the problem of replacing the revenue it would take away. However, if you want to stick with the transactional tax, then we have to do some things to bring it up to date. Our current sales tax structure is the same as it has been since the 1930s. It is time to bring it up to date to where technology and all the other provisions can take us.
Chairman McGinness:
I see this is the first reprint. How did the Assembly change the bill, and are we looking for uniform language throughout all the states?
Assemblyman Goldwater:
It was introduced late and was originally in skeleton form. The first reprint took the skeleton form and put in all the necessary details.
Senator Neal:
If we enacted this, how soon after would we receive the benefit?
Mr. DiCianno:
Certain triggers have to occur. First, this body would have to approve this enabling legislation. Congress will then have to allow the states to collect the tax over the Internet. After this occurs, the agreement does not go into effect until January 1, 2006.
Senator Neal:
Why would Congress have to approve going into this?
Assemblyman Goldwater:
Congress would be approving an interstate agreement, which is something not entirely unique, but it is very rare.
Senator Neal:
If I am ordering something out of Arizona and they are part of the agreement, does Arizona see to it the taxes are paid?
Chairman McGinness:
For anyone out there on the Internet, we are not proposing taxing the Internet. We are talking about taxing sales on the Internet.
Assemblyman Goldwater:
We are simplifying the sales tax code.
Chairman McGinness:
What are some of the major changes we have to make here?
Mr. DiCianno:
There are some major changes and I think Rick Combs, Fiscal Analyst, did an excellent job of putting together a package for you with respect to all the different sections (Exhibit C).
Chairman McGinness:
We have also been given an informative booklet entitled, “The Lawmaker’s Guide to the Streamlined Sales Tax Project 2003, The Year of Decision” put out by the University of Wisconsin (Exhibit F. Original is on file in the Research Library.).
The second tab in your binder (Exhibit C) says “Summary of Major Provisions.”
Mr. DiCianno:
In a nutshell, it provides uniform definitions with respect to what a tax applies to and what it does not. It provides for uniform definitions with respect to exemptions and how they are granted.
Chairman McGinness:
We are going to be required to put some questions on the ballot. Can you tell us the reason?
Mr. DiCianno:
It is one of the unique things as well as one of the hurdles for the State of Nevada. If Nevada becomes a governing state it can no longer initiate or refer to split-rate exemptions. In other words, you could not exempt the local portion without exempting the State portion. It has to be uniform.
Chairman McGinness:
So for example, if you look at the next tab, it says, “Description of Ballot Questions.” Ballot Question No. 1 refers to farm machinery and equipment. Last session this Legislature forgave the State portion, but the 2 percent question went to the voters and they denied it, so the 2 percent is still there and we can no longer have that disparity. Am I correct?
Mr. DiCianno:
That is correct.
Assemblyman Goldwater:
As you know, the 2 percent is the State portion. That is one of Nevada’s peculiar challenges.
Chairman McGinness:
Are the six questions outlined here the only disparities we have?
Mr. DiCianno:
That is correct.
Chairman McGinness:
How would you propose we put these on the ballot so people would understand? I mean are they going to look at six tax questions and just vote no? Do you think there is a mechanism we can try to explain? What happens if we pass half of them and the other half do not pass? Will we then not be able to be in the compact?
Mr. DiCianno:
The way the bill is structured, if in fact the voters do approve all of the six, then we do not have a problem. They would be exempt from the 2 percent portion and the local portion. If three pass and three do not, on the ones that do not, the bill provides for the repealer of that exemption.
Chairman McGinness:
So, no matter what, all of these would go away under this bill.
Mr. DiCianno:
Potentially, that is correct but the focus is to bring the State into agreement with the SSTP.
Rick Combs, Fiscal Analyst:
The way the bill is structured, if the voters approve the question, then one of two things will happen. Either the exemption included in the Local School Support Tax (LSST) and the other local taxes will be deleted, and therefore the sales and use tax acts will be in conformity. If they vote the other way, then the exemption will be added to the 2 percent portion, and again we will be in conformity. It is structured so no matter how the voters vote on each question, the two portions of the tax are going to be in alignment and conform to each other and therefore comply with the terms of the agreement.
Senator Neal:
Let me make sure I understand. Do these proposals deal with the 2 percent?
Mr. DiCianno:
That is correct.
Senator Neal:
So the ballot question would be to grant the 2 percent exemption.
Mr. DiCianno:
That is correct. It would give the voters the opportunity to vote it in.
Senator Neal:
So if they said no, the exemption will go away and the repealer of the other portion in statute would also go away.
Mr. DiCianno:
That is correct.
Senator Neal:
That sounds good to me, given what the voters might do on this particular issue.
Mr. Combs:
I thought it might be helpful to go through the first ballot question for you just to walk through how the mechanics of it work. The other five are exactly the same way. Ballot question 1 is set forth in sections 103 through 107 of the bill. It is basically going to ask the voters whether or not the sales and use tax act should be amended to exempt farm machinery and equipment. It was the same question posed to them last time and they voted it down. If the question is not approved, in other words if they do not want it to be exempt from the sales and use tax act, then sections 51 and 81 of the bill are going to become effective on January 1, 2006. Then Nevada Revised Statutes (NRS) 374.286, which is the section adding that exemption to the LSST provisions last session, is going to be repealed, which would mean the exemption for the farm machinery and equipment would be deleted from the LSST. It would not be in the sales and use tax act so therefore, the two would be in conformance.
If the question were approved, the changes to the sales and use tax act set forth in section 105 of the bill would go into effect January 1, 2006. That would put the exemption for the farm machinery and equipment into the sales and use tax act the same way it currently appears in the LSST. Again, the two portions would be in conformance with each other. The other five ballot questions work the same exact way except for obviously the differences between the two taxes.
Senator Rhoads:
So if this passes and I buy a tractor in Idaho and tractors are not exempt, do they automatically hold out sales tax in Idaho on the $100,000 tractor and send it to Nevada or do I have to voluntarily submit it?
Mr. DiCianno:
You would have to pay it.
Senator Rhoads:
I thought Idaho had a relationship with Nevada.
Mr. DiCianno:
We have reciprocal agreements with some states wherein if they realize there could be a potential loss in revenue, they would notify us to that effect.
Senator Rhoads:
But if this law were to pass, then would there be any automatic reporting procedure an out-of-state entity would commit to Nevada?
Mr. DiCianno:
No, that is not what this agreement does.
Senator Rhoads:
What would happen if you bought a fur coat in San Francisco, for instance?
Mr. DiCianno:
If you bought it over the Internet, it would be taxed.
Assemblyman Goldwater:
It is not to say the adoption of some SSTP will not allow us to have exemptions. We will have exemptions all over the sales tax. We will not have split-rate exemptions, which is something Mr. DiCianno said this State cannot do. The exemptions we have will be uniform.
Senator Neal:
In large part, would the compact Congress would engage in determine how all of this would work?
Assemblyman Goldwater:
Right now, the SSTP, which is an assemblage of tax directors and people like Mr. DiCianno, is deciding how it is going to work. Passage of this bill allows Mr. DiCianno to be a voting member and once they have come up with something workable, then Congress says okay.
Senator Neal:
Are you saying Congress would not be able to change the agreement you come up with in any way?
Mr. DiCianno:
Not if it is allowed, the states would have the ability to do what they need to do.
Senator Coffin:
Some of you know I sell and occasionally buy over the Internet. On my returns, you will notice business-to-business sales as well as regular consumer sales. Ninety-nine percent of my sales are over the Internet. We have about 3000 items on the Internet for sale in an organized fashion. In our terms of sales, if you are a Nevada resident you have to submit 7.25 percent sales tax and we collect it. However, we do not collect it from those who do not live in Nevada. We pretty well know who is a dealer and we do not collect tax on those sales no matter whether they are from Nevada or not. Sometimes we make an Internet sale inside Nevada and we collect sales tax on it unless the purchaser is a dealer. So there is a business-to-business sale and there is a business-to-person sale.
The question is, under this proposal, how do you differentiate between occasional sales, business-to-business sales, and ordinary customer transactions?
Mr. DiCianno:
It would be no different than what currently exists. If it is an occasional sale between two parties or if it is a business-to-business sale, they would already be exempt. There would be no sales tax charged. What would happen is if an Internet provider, such as eBay, sells a piece of tangible personal property to you in this State, they would be required under this agreement to collect the tax and report it to the central service provider who would remit it back to the State of Nevada.
Senator Coffin:
Have you discussed eBay in some of your meetings?
Mr. DiCianno:
I think you have touched on something very interesting. The remote sellers are in favor of this and are supporting it wholeheartedly. The trend is there.
Senator Coffin:
The thing is, an awful lot of people have closed up their brick and mortar stores and gone to the Internet because they could not compete with “click and mortar” or very large dot com companies. I might have dozens of pseudonyms I could use as a bidder, because I do not want people to know I am bidding on something. People follow bidder’s actions and if they know David Goldwater is using AUH20 as his bid name and they know his propensity to spend a lot of money on something, they may not go up against him because they know he will outbid them. But if you are a weak bidder and you have an interest in something, they may plug in your name and look at the auctions you are working. If you have an interest in something they are very interested in as well, they will outbid you. So how would eBay be responsible? How could they possibly intervene in this transaction?
Assemblyman Goldwater:
The problem with the different sales tax jurisdictions in the current rules is they are not sure whether or not they should be collecting it. Because they are not sure, there is potentially huge liability for them. One of the things the SSTP purports to do is to say if you register with us, here are the rules, now go enforce these rules. Once eBay registers and once they know the rules, they will be anxious to follow them. I have not run into too many people who are specifically tax avoiders, but I have run into a lot of people who say, “Help us understand the rules and help us know what those rules are.”
Senator Coffin:
I am going to support this. I want to make sure these questions are brought forward because a lot of business-to-business transactions occur on eBay. I am always on the lookout for certain items for my inventory and if I can steal them out there, I will buy them. The person I buy them from might or might not know I am a business and do not pay sales tax. I do not want to all of a sudden pay 5 percent sales tax. My purchase is for resale.
Assemblyman Goldwater:
I cannot emphasize this enough. There is no new tax in the SSTP formula. If it is taxable, eBay is only a conduit. Some of these retailers are only delivery methods. I mean it is just a different way in which a transaction occurs. If it is not currently taxable, it will not be taxable under the SSTP. If it is, and we are not collecting what should be taxable, it is going to start getting collected.
Senator Coffin:
I just want to make sure in hearings over the next few months and years, those who do a $1000 business-to-business transaction do not somehow end up with another $50 or $60 charge on the transaction because they were business‑to‑business.
Mr. DiCianno:
You have what is referred to as a resale certificate. You are purchasing goods as a business inventory and those goods are not taxable. They are for resale. The same principle would apply under the SSTP.
Senator Coffin:
I want to make sure you understand neither one of us knows we are a business necessarily. This is how the auction business works. If I identify myself as a business, there are people who will outbid me because they know I cannot pay above a certain amount because I would not be able to make a profit. They can then go another dollar above what I am going to pay. That is why I have a lot of names. Just remember all of the hundreds of equations that can occur in these kinds of transactions.
Chairman McGinness:
Senator Coffin brings up a good segue to a question I have. After the session is over, I undoubtedly will hear from a constituent who calls up and says, “I can’t believe you voted for this.” Once this takes effect, a constituent buying something over the Internet will be paying sales tax. Is there going to be any effect on the average constituent?
Mr. DiCianno:
I believe not. What they would be doing is paying what is due now, nothing more and nothing less.
Assemblyman Goldwater:
Tax directors all over are discovering where there is nexus and there is delivery and they are going to go out and enforce the rules. Some of the e-retailers are starting to collect tax. Amazon, for a long time, did not and now they are.
Senator Tiffany:
Assemblyman Goldwater has been working on this program for 4 years now for which I applaud him and I think it is a good idea. I am concerned about getting locked into a process right now, because there are a lot of approaches you can take to capture sales taxes over the Internet. Yours happens to be one of the proposals. Congress has not approved it yet for us to move forward so why get locked into a technique, a process, or a concept? The whole approach could be radically changed within 2 or 3 years because of the sophistication of the Internet providers and the sophistication of the auction houses and the catalog sales. It is getting more and more prolific, more sophisticated, and more techniques are being developed.
Mr. DiCianno:
The governing states will not go away. The beauty of being a governing state is if those technologies change and those business practices change, I can assure you the states will address those. It is all part of this process.
Senator Tiffany:
You are talking about a consortium of states having an agreement to work together to share this information. What you are saying to me is when Congress says yes, the consortium will decide at that time what is the best technique and approach. Is that right?
Mr. DiCianno:
That is correct, but it is a work in progress.
Senator Tiffany:
It will continue to be. I know Assemblyman Goldwater has talked about a third party being the filter for this. A third party being the collector may or may not be the way to do this. That is one of the concepts being proposed. I do not want to get stuck in one idea, or one approach to do this.
Mr. DiCianno:
That is why it is important to have a member of this state involved in the negotiation. This state will be represented as to whether or not a particular service provider would be chosen and what the associated cost would be. You would want Nevada to have a say in it.
Chairman McGinness:
We have uniform codes of doing banking, stocks, and other things. This would be similar. I mean every couple of years, or every 4 years, you may come back with changes to this. Am I envisioning this right?
Mr. DiCianno:
As business practices change and as states change and evolve with respect to different issues, yes. Absolutely. There is no question it is a work in progress.
Assemblyman Goldwater:
I would be remiss if I did not mention Nevada’s numerous advantages in its sales tax code and some of the disadvantages. One of our major disadvantages is the current state of our information systems in the Department of Taxation. I sit on the Ways and Means Committee and we failed with the Automated Collection Enforcement System. Anyone would classify it as a failure. Whatever we do, we need to provide the Department of Taxation with adequate information systems.
Senator Rhoads:
Could you explain the fiscal note? Is it $147 million?
Mr. DiCianno:
That is a best-guess estimate and I truly believe it would require the department to conduct a study on how much Internet commerce is occurring in Nevada. The information would empower the representative of the State of Nevada when it goes into those negotiations. We would have a better knowledge as to what the amount of revenue would be to this State.
Senator Rhoads:
So the $147 million is the amount of revenue we would get per year?
Mr. DiCianno:
That is correct. I need to caution though, it is an estimate and it was based upon a study I believe is somewhat flawed. But it is a best-guess estimate and it is the only estimate we have right now.
Assemblyman Goldwater:
It is an estimate the Governor identified in his State of the State speech as a major challenge to this State in having set our budgets and the growth rate for the sales tax for our State budgets. Year after year, even with conservative estimates in booming economic times, we have come in a little bit below more conservative estimates. There is no identifying reason other than remote sales and Internet sales.
Gaylyn J. Spriggs, Lobbyist, Nevada Taxpayers Association:
The Nevada taxpayers are in favor of this bill. I do not think I can add anything else to what has already been said.
Mary Lau, Lobbyist, Retail Association of Nevada:
We are in full support of A.B. 514 and want to thank Assemblyman Goldwater for continuing to carry this process forward. As has been stated, this is a work in progress. There will continue to be meetings of the SSTP. It is a multistate jurisdictional effort. It is very imperative Nevada not lose its seat at the table to define how this process will go forward. I believe Congress dictated there should be 20 states participating and I think there are 32 to 36. Nevada, in order to protect its interests, has to be part of the process.
I wholeheartedly agree with and underscore Assemblyman Goldwater’s testimony about funding information technology for our tax department.
Christina Dugan, Lobbyist, Las Vegas Chamber of Commerce:
We, too, agree with Assemblyman Goldwater’s bill and appreciate him bringing it forward. We think moving forward with streamlining the sales tax is important.
Chairman McGinness:
We will close the hearing on A.B. 514. We have a couple of bills to consider in our work session. First, we will look at A.B. 348.
ASSEMBLY BILL 348 (1st Reprint): Revises provisions governing development of certain factors used in determination of taxable value of improvements to real property for assessment of property taxes. (BDR 32-1121)
Chairman McGinness:
We were working on some amendments for this bill. If you will turn to page 3 of your work session document (Exhibit G), it talks about NRS chapter 361 and you will note some of the changes. In section 1, subsection 1 the date in which the department shall provide the proposed factors to the counties is moved up to February 1. In subsection 2, the date the county assessors have to notify the tax commission that they either approve or object to the factors is changed to May 15.
We removed subsection 3 entirely. The changes in subsection 4 will make sure there is not a separate hearing. It will just be done at a regular commission meeting. If you recall there was a discussion regarding the publishers in which they were required to attend the hearing. This change requires the tax commission to provide to those attending a copy of the published references and a description of the local indicators used by the department to establish those factors.
Mr. DiCianno, were there further amendments?
Mr. DiCianno:
Yes, we have been in consultation with the taxpayers association and with Mr. Combs with respect to revisions. They are different than what is shown in your work session document.
Mr. Combs:
I think the concepts are pretty much the same. There were a few word changes suggested. Basically, subsection 4 of section 1 of the bill is the one receiving the major amendment. The way it was worded before caused the committee some concern regarding what would be provided to the assessors at the hearing. The proposal is to change the language at the end of subsection 4 where it says “a copy of the published references” to “ a copy of any published references.” Where it says “a description of the local indicators of value that were used by the department,” remove “a description of,” making it simply read “the local indicators of value that were used by the department.”
One other proposal in subsection 4 would make sure the hearing would happen before the factors were adopted, which I think is the intent anyway. Therefore, I do not think there will be any problem adding that clarification.
Ms. Spriggs:
The Nevada Tax Commission authorized me to say the commission is happy with the changes and they do not believe it will add significantly to their workload. They do not see a problem with the new language we are proposing.
SENATOR RHOADS MOVED TO AMEND AND DO PASS AS AMENDED A.B. 348.
SENATOR TOWNSEND SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR NEAL WAS ABSENT FOR THE VOTE.)
*****
Chairman McGinness:
We will close the hearing on A.B. 348 and look at A.B. 437.
ASSEMBLY BILL 437: Revises definition of "supplier" for purposes of tax on and sale of liquor. (BDR 32-1161)
Harvey Whittemore, Lobbyist, Nevada Beer Wholesalers Association c/o Bonanza Beverage, and Southern Wine and Spirits:
Senator Neal asked about the language presently contained in NRS 597.260 regarding improper substitution. He wanted to know whether the enforcement provisions were accurately reflected in the legislation to provide the attorney general with primary responsibility with respect to illegal substitution. He pointed out a glitch and we agree with his proposed request to provide that the attorney general has primary responsibility to enforce the provisions of NRS 597.260.
Basically, under existing law, the consumer advocate has the authority to exercise the enforcement provisions of NRS 597. However, this is a criminal provision and the consumer advocate cannot enforce criminal provisions so there clearly is a mistake.
Gary E. Milliken, Lobbyist, Distilled Spirits Council of the United States:
We are in support of Mr. Whittemore’s amendment.
Mr. Whittemore:
Senator Coffin requested this bill be used as a vehicle for modifying changes with respect to transfers associated with beer within a certain marketing territory. Senator Coffin’s proposal in subsection 3 of NRS 369.4865 is acceptable to us. At the bottom of page 5 of the work session document (Exhibit G), we are redefining liquor, which currently does not include beer. At Senator Coffin’s request it will say, “’Liquor’ shall not include beer, unless the wholesale dealer otherwise agrees in writing with the non-restricted licensee that beer may be transferred by such non-restricted licensee.” It allows beer and liquor to be included and transferred from one entity to another as long as it is in the same marketing area. We had no problem with including this in the bill.
Mr. Combs:
I would like to try to clarify the amendments. Nevada Revised Statutes 228.380 states “the consumer’s advocate may exercise the power of the attorney general in areas of consumer protection, including, but not limited to enforcement of chapters 90, 597 …” After checking NRS 597 and discussing this with Brenda Erdoes, Legislative Counsel, she agrees there is no provision in the subhead of chapter 597 of NRS specifically stating the attorney general has the authority to enforce those provisions. However, I would argue, given the section says, “may,” that the consumer’s advocate may or may not enforce those provisions, but if the attorney general has the authority, they will always have the authority. So, it might be appropriate to include in the subhead of NRS 597 that the attorney general has the authority to enforce the provisions of the subhead.
Mr. Whittemore:
That is exactly correct. You have a provision basically saying the consumer’s advocate may enforce it but the very next sentence says they do not have criminal authority and this is a criminal provision. I think Senator Neal’s concern was if we are going to have a law on the books and we want to protect the consumer, let us protect the consumer and give the attorney general primary enforcement responsibility.
Mr. Combs:
Regarding the second amendment, we are looking at this from a term of changing the definition of liquor. When this goes to the Legal Division, they may decide there is another way to do it. It might involve adding “except as otherwise provided” at the beginning and adding a new subsection saying beer can also be transferred but only if the wholesaler has agreed in writing to do so.
Mr. Whittemore:
The final piece is shown on page 4 of your work session document. It amends the existing bill with new language stating:
Amend section 1, page 2, by deleting lines 3, 4 and 5 and inserting: “the brewer, distiller, manufacturer, producer, vintner or bottler of the liquor, or a designated agent of such a person, has not designated an importer for the importation of the liquor into this state; or…”
SENATOR RHOADS MOVED TO AMEND AND DO PASS AS AMENDED A.B. 437.
SENATOR TOWNSEND SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
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Chairman McGinness:
We are adjourned at 3:21 p.m.
RESPECTFULLY SUBMITTED:
Ardyss Johns,
Committee Secretary
APPROVED BY:
Senator Mike McGinness, Chairman
DATE: