Direct Marketing Association, The v. Huber

Filing 69

DESIGNATION OF DEPOSITION TESTIMONY Excerpts from the Transcript of the Deposition of William F. Fox and accompanying deposition exhibits by Plaintiff Direct Marketing Association, The. (Attachments: # 1 Exhibit Dep. Ex. 95, # 2 Exhibit Dep. Ex. 96, # 3 Exhibit Dep. Ex. 98, # 4 Exhibit Dep. Ex. 99, # 5 Exhibit Dep. Ex. 100, # 6 Exhibit Dep. Ex. 101)(Schaefer, Matthew)

1

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO

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2
3

4

THE DIRECT MARKETING ASSOCIATION,

5
6

Plaintiff,

v.

CIVIL ACTION NO.
10-cv-01546-REB-CBS

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8

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10

ROXY HUBER, in her capacity
as Executive Director, Colorado
Department of Revenue,
Defendant.

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12

/\

..

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* * * * * * * * * * * * * * * *

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15
DEPOSITION OF WILLIAM F. FOX
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17

November 16th, 2010

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=====================================================
TRUESDEL & RUSK
Registered Professional Reporters
Ginger Truesdel, RPR, RDR, CRR
Certified Realtime Reporter
LCR #003
7047 Duncan's Glen Drive
Knoxville, Tennessee 37919
[phone]

24
25

www.truesdelrusk.com
[e-mail]

Truesdel "' Rusk

12

(
,

It is to my understanding a copy of

1

2

your report with your attached Vita.

3

an opportunity to look at that?

4

5
6

Have you had

I did, and I agree it does appear

A

to be my report and my attached vita.
And on Page 5 of that document, is

Q

7

that not your original, but is that your signature

8

there in this photocopy?

9

It is.

10

Q

And the date of the report is

11

November 5, 2010?

12

(

A

A

That's correct.

13

Q

Can you tell me in what areas you

14
15

are an expert?
A

Well, generally, in economics and

16

also in taxation and with much of that focused on

17

state and local taxation.

18

Q

Now, am I correct that the report

19

that you prepared in connection with this case

20

marked as Exhibit 95 was derived from another report

21

that you did outside of this litigation in 2009?

22

A

That's correct.

23

Q

And, in fact, on Page 1, you

24

indicate:

"The estimates and methodology discussed

25

below are drawn specifically from the 2009 report

Truesdel & Rusk

13

(

1

written by several colleagues and myself that is

2

referenced immediately above it.

Do you see that just below the

3

4

II

list?
A

5

Just below the list.

r think it's

6

true, r just don't see it on the page, but it is

7

true, nonetheless.

8

Q

9

10

Just for purposes of the - - right

below the five bullets you'll see a sentence that
begins "the estimates and methodology."

11

Yes.

12

Q

And that's correct

13

A

That is correct.

14

Q

- -

16

A

Yes.

17

(

A

Q

When was that 2009 report

15

18

that it's drawn from the 2009

report.

published?
A

19

Well, we prepared it in the late

20

winter and mostly in - - sorry, in the early and late

21

winter of 2009.

22

2009.

23
24

(

".

25

Q

It

was published then in May of

Okay.

As indicated, it was

published in State Tax Notes?
A

That's correct.

Truesdel " Rusk

14

(

1

Q

2

We'll mark as the next exhibit this

document.

3
4

(Exhibit
Q

No.

96 marked)

So I'm showing you what we marked

5

as Exhibit 96, which is a document entitled State

6

and Local Government Sales Tax Revenue Losses from

7

Electronic Commerce dated April 13th, 2009.

8

one is Bates stamped WF000033 through WF000068.

This

9

Is that there the report that you

10

just described that was published in the State Tax

11

Notes in May 2009?

12

(

A

It certainly looks to be, yes.

13

Q

And is that the report that has

14

formed the basis of your report in this case,

15

Exhibit 95?

16

A

Yes.

17

Q

In preparing Exhibit 95, did you,

18

in essence, extract data specific to Colorado from

19

your 2009 report?

20

A

21
22
23

Yes, plus describe a general

methodology.
Q

In preparing Exhibit 95, did you do

anything to update your work from 2009?

24

A

25

exception to that.

NO.

Well, let me -- let me make an
I did, however, go back and

Truesdel

I<

Rusk

15

(

1

compare estimates that were included in the 2009

2

report with data that are currently available from

3

the U.S. Department of Census.

4

that.
Q

5

Okay.

I do remember adding

Other than that update with

6

regard to a comparison to census data or data

7

available from the U.S. Census Bureau, anything else

8

to update it?
A

9

I

don't think.

And then the data

10

for Colorado that are used in my current report did

11

come, for Colorado, did come from this 2009 report.

12

(

13

Q

How many hours did you spend

preparing Exhibit 95?

14

A

Well --

15

Q

The report in this case.

16

A

Yeah.

What I have spent is 15

17

hours on the case in total.

18

the report, gathering documents for you and for the

19

Attorney General's Office, you know, getting my

20

resume prepared and so forth.

21

Q

okay.

That includes preparing

Are you able to isolate from

22

the 15 hours how much time was spent preparing the

23

actual report?
A

24

l

25

I

didn't keep my time in that

fashion.

Truesdel & Rusk

20

(

1

A

NO.

2

Q

Can you tell me what you discussed?

3

A

I would describe it as general

4

advice for me in terms of the deposition, things

5

like make sure to answer the questions that you ask,

6

that sort of general advice.

7

any -- any noticeable conversation about the

8

substance of the report itself.

9

Q

Okay.

I don't remember

Did you talk about any other

10

issues not contained in your report that -- related

11

to sales and use tax?
A

12

(

You know, let me admit that I'm a

13

person who doesn't remember telephone conversations

14

all that well, and we did have conversations, I'm

15

not sure I'll be able to give you any specifics, it

16

wasn't that long of an overall telephone call, but

17

about some other kinds of questions that might be

18

posed.

19

But, you know, just that, just a

20

couple of examples of the kinds of questions that

21

might be posed.

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23

24
25

Q

What other kinds of questions did

you talk about?
A

That's what I'm trying to remember

and -- you know, one issue I remember us talking

Truesdel & Rusk

21

(

1

about was, you know, the best approach to dealing

2

with states' difficulties in collecting sales and

3

use taxes on remote commerce.

4

literally the only example that occurs to me.

5

Q

That's actually

What do you mean by dealing with

6

states difficulties in collecting remote -- taxes on

7

remote sales?

8

9

A

My view is that states and local

governments need to be able to effectively

10

administer the sales and use tax on all sales to

11

their residents and businesses, and the Colorado

12

statute is one approach to -- to dealing with that

13
14

Q

Did you communicate about any other

15

16

Come back to that in a moment.

subjects that you can remember?

17

A

Nothing else that I

18

Q

Did you communicate bye-mail in

19

remember.

preparation for this deposition?

20

A

No.

21

Q

How much time did you spend

22

preparing in total?

23

For the deposition itself?

24

L

A

Q

Yes, for the deposition.

25

A

About two hours including reading

Truesdel & Rusk

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(

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business that did not market to Colorado, for

2

example, or a particular state; in other words,

3

there's no reason not to market to a state, per se?

4

A

It just would depend -MS. SNYDER:

5

Objection to the form.

6

Q

You can go ahead.

7

A

It would depend on what they're

8

selling, I think, as to whether or not Colorado

9

would be a target for a particular thing or not.

10
11

Q

But an internet seller, and you've

analyzed e-commerce, correct?

12

A

Yes.

13

Q

So you're actually talking about

14

internet sellers.

15

are available essentially indiscriminately over the

16

united states to those who have access to the

17

internet?

18

A

Yes.

19

Q

For purposes of allocating income

Internet sellers, their websites

20

21

have allocated the e-commerce sales based, as I

22

understand it, on -- well, tell me and I'll see if I

23

can find it in the report.

24

~ ....

or allocating sales, rather, for your report, you

total state and local tax revenues?

25

A

Based on their share of

That's correct.

Truesdel r. Rusk

30

(

1

Q

And this allocated about

2

1.7 percent of the national e-commerce sales in each

3

category to Colorado, is that correct?

4

A

Yes, that is correct.

5

Q

So if we were using that measure,

6

1.7 percent, we could take a firm's national sales

7

and we could apply 1.7 percent to get an estimate of

8

its Colorado sales?
A

9

Well, let me re-emphasize, that

10

we're in no way trying to apply this to individual

11

firms

12

Q

13

A

Correct.
so what one can do in an

14

aggregate sense and is meaningful is very different

15

from what makes sense to apply to a particular

16

business.

17

about here.

18

Q

That's the part that I am being hesitant

Okay.

But over the run of

19

businesses in the united states, you've done this to

20

apply it to sales of e-commerce nationally --

21

A

Yes.

22

Q

-- and you've used that percentage

23

to -- that 1.7 percent against national e-commerce

24

sales?

25

A

That's correct.

Truesdel & Rusk

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(

Q

1

So over the run of businesses

2

dealing in e-commerce, you've viewed it as being a

3

reasonable measure to apply about 1.7 percent of

4

those sales to Colorado?

5

A

We do.

6

Q

Page 2 of your report, Exhibit 95,

7

under the heading Estimated Sales and Use Tax Losses

8

for Colorado, you provide certain estimates, is that

9

correct?

10

A

Yes.

11

Q

And to be more specific, why don't

12

(

you tell me what those estimates are listed there in

13

the first line of that section?

14

A

The estimates are the dollar amount

15

that we believe will go uncollected in Colorado in

16

2010, 2011, and 2012 because of the state's

17

inability to fully collect the sales and use taxes

18

due on e-commerce sales.

19

Q

okay.

And what you're measuring

20

there is the loss on all e-commerce sales delivered

21

into Colorado?

22

A

That's correct.

23

Q

And I think as you note on the same

24

page in the prior paragraph, these are almost

25

exclusively use taxes, not sales taxes?

Truesdel & Rusk

32

1

A

Yes.

2

Q

When you say almost exclusively,

3
4

what percentage are we talking about?
A

Yeah, I mean it's very high.

It's

5

hard for me to come up with examples when it would

6

not have been a use tax situation that's involved,

7

but I'm not saying it's impossible, it's just -- all

8

the examples that I think of would be use tax.

9

10

Q

Now, if you look at your April 2009

report, Exhibit 96, Page 4 of that report

11

A

Okay.

12

Q

-- talking about national findings,

13

you indicate there at the top of Page 4, and tell me

14

if I read these right:

15

"These losses are equal to what

16

states would collect if they could achieve

17

100 percent compliance on the sales and use

18

taxes due on e-commerce sales, and arise

19

because states are unable to enforce

20

collection, particularly because of

21

limitations such as those imposed by Quill

22

v. North Dakota. "
Did I read that right?

23
24

A

You did.

25

Q

And is that same statement

Truesdel « Rusk

33

(

1

applicable to the estimates you have here in Exhibit

2

95 with regard to Colorado?

3

A

Yes.

4

Q

So these are amounts that could be

5

collected if Quill v. North Dakota were overturned

6

by the Supreme Court or by federal legislation

7

enacted by Congress, is that correct?

8

9
10

A

And if there was 100 percent

compliance.
Q

So Quill would need to be

11
12

Court, 100 percent compliance.

13

that, I think you note in your 2009 report that it

14

(

overturned by the legislation or by the Supreme

presumes there's no small seller exception?

Is it also true

15

A

That is true.

16

Q

Okay.

17

A

If it were federal legislation, it

18

would depend on the characteristics of that

19

particular federal legislation.

20

Q

And, in fact,

isn't it true that

21
22

advocates of federal legislation seeking to overturn

23

Quill as a -- in support of their efforts to

24

l

your longer report from 2009 has been cited by

convince Congress to enact such legislation?

25

A

At least they've used the numbers

Truesdel

« Rusk

38

(

2

So you have year by year and then

Q

1

the far right column is an average of those years.
Do you see that with regard to

3

4

both, assuming a small business exception and then

5

assuming there is no small business exception, that

6

Eisenach and Litan conclude that the average

7

uncollected use tax on e-commerce is something less

8

than half of your estimate?

.

9

A

I do see that.

10

Q

Now, are you aware that there are

11
12

(

others besides Eisenach and Litan, who have also
opined that your estimates might be too high?
am.

13

A

I

14

Q

We'll mark as the next document

15

this Exhibit 98, which I have handed you and,

16

Melanie,

17

document entitled "Setting The Record Straight:

18

Modest Effect of E-commerce on State and Local Sales

19

Tax Collections," prepared by Peter A. Johnson,

20

Ph.D., and this dated July 31, 2008.

I'll read it carefully for you, it's a

(Exhibit NO. 98 marked)

21
22

The

Q

Now, among the folks who have

23

offered counter-estimates is, in fact,

24

Marketing Association, is that correct?

25

A

the Direct

That was my understanding, right.

Truesdel & Rusk

39

(

1

2

But I was not familiar with this report.

Q

Okay.

Professor Johnson is, as

3

identified here, is a senior economist with the

4

Direct Marketing Association.

5

A

Okay.

6

Q

Were you aware that Professor

7
8

9

Johnson had prepared a report?
A

I

was not.

I

was aware that Direct

Marketing Association, in my memory, had done one

10

some years before,

11

Q

I

was not aware of this study.

Okay.

Several years before in

12

connection with federal legislation that had been

13

pending before congress at the time?

14

A

Well, back in the early 2000's when

15

our first report was put out, my remembrance is that

16

the Direct Marketing Association had a response at

17

that time.

18

Q

Okay.

And if you look at this

19

document,

Exhibit 98, turn to Page 8, if you would,

20

and you'll see that on Page 8 there is a Table 5

21

that is entitled "Total unremitted Tax on E-commerce

22

Sales in Billions," and it gives a listing by year

23

for 2005 through 2008.

Do you see that?

24

A

I

do.

25

Q

And the total uncollected tax

Truesdel & Rusk

40

1

identified in Professor Johnson's report for 2008 is

2

(

estimated to be 5.4 billion?

3

A

Yes.

4

Q

And in your report, Exhibit 96, at

5

Page 7, so your 2009 report, which is Exhibit 96, if

6

you turn to Page 7?

7

A

Yeah.

8

Q

Your estimate for 2008 with

9

baseline as opposed to optimistic was 7,726,000,000?

10

That's correct.

11

Q

So --

12

A

I'm sorry, seven billion, seven

14

Q

Twenty-six?

15

(

A

A

Sorry, sorry, you're right, you're

Q

So Johnson's estimate is about

13

16
17
18

hundred

right.

30 percent less than your estimate for 2008?

19

A

That sounds about right, yes.

20

Q

with regard to your report, Exhibit

21
22

cited in your report to support your conclusions

23

regarding the level of uncollected sales and use tax

24

(

95, you've relied on various sources of information

in Colorado as set forth in the report?

25

A

That's correct.

Truesdel " Rusk

41

(

1

Q

And those sources, many of them are

2

cited also in the 2009 report regarding the

3

nationwide picture?

4

A

Yes.

5

Q

Among those is a compliance stated

6

by the Washington Department of Revenue?

7

A

That's correct.

8

Q

Do you recall that?

9

A

Yes.

10

Q

And so, for example, I think it's

11

cited in two places, at least it's identified in

12

Footnote 3, I believe, first, on Page 3, and then

13

again in Footnote 12 on Page 5.

14

A

Yes.

15

Q

And for what principle or point did

16

you rely upon the Washington Department of Revenue

17

study?

18

A

One aspect of the study is -- of

19

our study, is to be able to anticipate what level of

20

compliance is anticipated both with use tax by

21

vendors when they comply and by use tax when

22

individuals or businesses comply.

23

study provides estimates of that.

24

25

Q

The Washington

The Washington study is a business

compliance, yes?

Truesdel " Rusk

42

1

A

Yes.

2

Q

So it's a B to B sales -- and it's

3

use tax compliance as well as sales tax compliance?

4

A

In fact, all taxes.

5

Q

Okay, by Washington businesses.
So -- and the report that you

6
7

relied upon indicates it was from 2008?

8

A

That's correct.

9

Q

Okay.

So looking at your report at

10
11

approximately 25 percent noncompliance with

12

(

Page 3, I believe you indicate that there is

e-commerce sales for use tax, is that -- do I have

13

that right?

14

What is the level of, based on the

15

washington report, the level of noncompliance with

16

use tax for businesses?

17

A

Right.

I want to be clear, the

18

numbers in this paragraph that you're referring to

19

on Page 3 did not derive directly and solely from

20

the washington study.

21

compliance rate, I'm being approximate now, from the

22

washington study in our calculations.

23

We do use the 75 percent

It just so happens that it's also

24

l

true that when you work through all of our

25

calculations, you end out with about 75 percent

Truesdel & Rusk

I

43

(

1

compliance overall with e-commerce and that's what's

2

being reported in the paragraph that you're

3

referring to.

4

So when you say overall compliance,

Q

5

it's by businesses with regard to reporting use tax

6

on e-commerce?

7

A

And by individuals.

And so what we

8

have is both.

What's going on in our calculations

9

here is, first of all, allowing for the possibility

10

that there is sales tax compliance by firms that

11

either have nexus or agree to voluntarily comply

12

with the tax.

13

is for those transactions where vendor compliance

14

did not take place, we then allow for use tax

15

compliance.

16

for both B to Band B to C transactions.

17

Q

And then -- and then a second level

And so we're doing that at both levels

Okay.

And that's what you're

18

saying is in the paragraph on Page 3 that we're

19

looking at?

20
21
22
23

A

That's right, is an aggregate of

all of our analysis that's in that paragraph.
Q

But if

I

want to focus for a moment

on the use tax compliance by businesses

24

A

Yes.

25

Q

-- is that a -- is that number

Truesdel & Rusk

44

(

1

derived from the Washington study?

2
3
4

A

Yes, it's taken from the Washington

Q

Okay.

study.
And there's -- with regard

5

to business compliance with regard to sales tax, it

6

appears that you indicate that it's about a

7

1.7 percent noncompliance rate by businesses in the

8

washington study with regard to sales tax?

9

A

That's correct.

10

Q

And just to be clear, those are

11
12

(

businesses registered in the state of Washington?
A

That's correct.

The washington

13

study, in fact, underestimates noncompliance because

14

it only includes registered vendors.

15

Q

Obviously, the problem that you

16

have attempted to describe in your report, if the

17

1.7 percent were the national compliance rate on

18

sales taxes, it wouldn't be nearly the same issue.
I mean, in other words, the

19

20

1.7 percent, that would indicate 98.3 percent by all

21

firms nationwide and that's not what we're talking

22

about here, this is washington registered

23

businesses?

24

25

A

Right.
MS. SNYDER:

Objection to the form.

Truesdel & Rusk

45

(

MR. SCHAEFER:

1

Fair enough.

2

Q

Go ahead if you understood it.

3

A

I mean, this does refer

4

specifically

the 1.7 percent refers specifically

5

to compliance in the state of Washington by

6

registered vendors.

7

nonregistered vendors that might,

8

nexus under current constitutional rulings in the

9

state, but aren't choosing to comply with the law.

It does not include
in fact,

have

10

Q

Right.

11

A

And I can give you a variety of

12
13

happening.

14

tax estimates as lower bounds of what the reality is

15

(

examples of why that and how that might be

in the state of washington.

Q

16

And so we view both the sales and use

At the risk of getting way too
in fact,

the firm

17

sales and use tax wonky, the

18

that may have nexus, but isn't registered, their

19

liability may actually be for use tax and, in fact,

20

it may be a use tax they should be collecting

21

because they may not be -A

22

It could be, but it doesn't need to

23
24

l

be.

You could envision a situation along the

Washington border where you have oregon with no

25

sales tax and washington with a sales tax, and you

Truesdel & Rusk

46

(

1

could envision a situation, in fact, accountants

2

tell me this absolutely happens with great degree of

3

regularity where firms driving from oregon into

4

washington, thereby almost surely establishing

S

nexus, engaging in selling their product, driving

6

back to Oregon and delivering it by common carrier

7

from washington -- from Oregon and saying we have no

8

sales tax liability and not registering, that's a

9

use tax problems.

10

Sorry, sorry, that's a sales tax

problem.
They're in Washington, they have

11
12

(

physical presence in Washington, it's a transaction

13

in Washington, might even be drop-shipped into

14

washington, and so you know it could be either one,

1S

just depends on the specifics of the situation.
Q

16
17

That did get too sales and use tax

wonky.
You applied the rates, though, the

18
19

washington rates with regard to -- of compliance

20

rates from the washington DOR study with regard to

21

the estimates for Colorado?

22

A

That's correct.

23

Q

Now, it's true, is it not, that use

24
2S

tax compliance rates, in fact, vary state to state?
A

They will.

Truesde1 & Rusk

47

1

2
3

Q

Is there a reason that you've used

the washington study?
A

Yes, because washington -- and let

4

me note here, there have been a series of these

5

washington studies.

6

one for this particular analysis, but we have relied

7

on earlier ones for other estimates that we did.

8
9

We relied on the most recent

And the results in them are very
consistent, very, very little deviation in terms of

10

their compliance rates.

And so it's a consistent

11

set of studies from the state of washington.

12

(

Q

Okay.

13

A

And to our knowledge, they are the

14

best estimates of sales and use tax compliance that

15

are available for U.S. states.

16

Q

Okay.

When you said they are

17

consistent, you meant within Washington study to

18

washington study, they are consistent?

19

A

I did mean that, yes.

20

Q

If the Colorado experience differ

21

in some respects in terms of compliance, that would

22

change your estimates.

23

information for Colorado, if it were available, as

24

you say, it would change the estimates with regard

25

to Colorado?

If you had correct

Truesde1 & Rusk

48

A

1

2

It could either decrease or

increase the revenue implications for Colorado.
But you think the Washington study

Q

3

4

is a reliable one and a good basis for estimating

5

compliance in other states, including Colorado?

6

A

Yes.

7

Q

Now, you mentioned they have data,

8

are you aware that the Washington DOR, in fact,

9

updated its study in August of 2010?
A

I have not gone out and looked at

12

Q

okay.

13

A

Thank you for letting me know.

14

Q

Your report, of course, continues

10
11

(

15

it.

to rely on the 2008 study?

17

Well, because we didn't redo the

A

16

report, yes.
I'm going to mark a copy of that

Q

18
19

2010 Washington DOR compliance study as the next

20

exhibit,

I think as Exhibit 99.

21
22

(Exhibit NO. 99 marked)
Q

So handing you a copy of Exhibit

23
24

l

99, which is a document entitled Department of
Revenue Compliance Study, it's on State of

25

washington Department of Revenue letterhead,

Truesdel & Rusk

49

(

1

indicates that it was prepared -- dated August 20th

2

of 2010.

3
4

Does this look similar in format to
the other studies from Washington that you recall?

5

A

It does.

6

Q

And if you look at Page 2, there's

7

a chart on Page 2, which in fact compares the 2008

8

compliance study that you've relied upon to the 2010

9

compliance study.

10

A

I do.

11

Q

So looking at first a use tax, it

Do you see that?

12

(

indicates that the rate of noncompliance for 2010 is

13

estimated to be 23 percent as opposed to the

14

25.5 percent from 2008?

15

A

Yes, that's correct.

16

Q

Okay.

Now, if you use this new

17

rate, this new 23 percent rate instead of 25.5, that

18

would reduce somewhat your estimates of uncollected

19

tax, would it not?

20

A

If I were going to redo the study,

21

I would of course redo all of the numbers, I

22

wouldn't just pick one number and make a change.

23

would use -- if I were to redo my 2009 study, I

24

would use this 23 percent use tax compliance, but I

25

also would make a lot of other changes, including

Truesdel & Rusk

I

50

(

1

the fact that our estimates of e-commerce are much

2

lower than the reality that we've seen in the

3

meantime.

4

Q

I'm trying to isolate the effect of

5

this change, that this particular updated report

6

would indicate that there is a lower level of

7

noncompliance, at least according to the washington

8

Department of Revenue, than you had estimated for

9

your 2009 report?

10
11
12

(

13

A

Than what we used in the earlier

report, that's correct.
Q

And than used in your Exhibit 95,

your report in this case?

14

A

That's correct.

15

Q

And in looking at the sales tax

16

line immediately above it, that indicates that

17

noncompliance with the sales tax, again by

18

washington registered businesses, is now one percent

19

estimated for 2010 as compared to the 1.7 percent

20

estimated for 2008?

21

A

That's correct.

22

Q

And so similarly, just isolating

23

that effect, that would have the effect of reducing

24

estimated levels of uncollected or unreported tax

25

all other things being equal?

Truesdel & Rusk

51

(

1

2

A

All other things being equal, but

they are not equal, I have to re-emphasize.
Q

3

So in terms of just that effect,

4

the effect of that change, of that indication that

5

there is a somewhat higher compliance rate, lower

6

noncompliance rate for the sales tax with regard to

7

registered businesses, that would tend to reduce the

8

estimates of uncollected tax.
A

9
10

Holding everything else equal,

that's not equal, that's correct.
Q

11

In your report, Exhibit 95, you

12

(

also relied upon a university of Maryland study,

13

which I believe is cited in Footnote 11 --

14

A

Yes.

15

Q

-- Page 5.

16

A

Yes.

17

Q

And this is a study from a group of

18

academics at the university of Maryland, is that

19

correct?

20

A

Yes.

21

Q

So I'm going to mark a copy of

22

that, which is among the documents that you produced

23

or that the Attorney General's Office produced in

24

connection with your report, and mark that as

25

Exhibit 100.

Truesdel & Rusk

52

(

(Exhibit No. 100 marked)

1

2

Q

So I'm handing you Exhibit 100,

3

which is a document Bates stamped -- and when I say

4

Bates stamped, Professor Fox, maybe you're familiar

5

with it from other cases, maybe you're not, the

6

Bates numbers is the lower right-hand number that

7

attorneys in litigation assign so that they can keep

8

track of documents by a more simplified numbering

9

system rather than having to do something else, so

10
11

stamped WFOOOl77 through WF000184.

12

(

we know what we're looking at.

This one's Bates

is entitled "The Tail is Longer Than You Think:

13

Surprisingly Large Extent of Online Sales by Small

14

Volume Sellers."

And the document
The

The authors are Joe Bailey,

15
16

B-A-I-L-E-Y, and a series of other individuals

17

identified as being associated with the Robert H.

18

Smith School of Business at the university of

19

Maryland, and the report is dated May 12, 2008,

20

marked draft.

21
22

Is this the document that you cite
in your report, Exhibit 95?

23

A

It is.

24

Q

Now, you state on Page 5 of your

25

report, Exhibit 95, our survey -- excuse me, strike

Truesde1 " Rusk

53

1

that.
Looking at the sentence to which

2

3

the Footnote 11 is attached:

"Vendor compliance

4

relies on a survey of large internet vendors and the

5

Maryland Long Tail study."

6

A

Yes.

7

Q

This document, Exhibit 100, is the

8

Maryland Long Tail Study?

9

A

That's correct.

10

Q

To make sure that I'm not missing

11

something, can you show me where in Exhibit 100, the

12

Maryland Long Tail Study, the authors of that study

13

analyze vendor compliance with sales and use tax?

14

A

Well, they don't.

15

Q

Oh, okay.

16

A

I think that wasn't exactly what it

17

said.

18

upon that study, but we don't use compliance numbers

19

from that study.

20

21

It said that our vendor compliance relies

Q

Okay, so you're not relying on the

study for rates of compliance?

22

A

That's right.

23

Q

What are you relying upon the

24
25

Maryland Long Tail Study for?
A

For a distribution of the size of

Truesdel & Rusk

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(

1

e-commerce vendors.

2

Q

So, help me out with what you mean

3

by the distribution of the size of e-commerce

4

vendors?
A

5

6

There are a relatively small number

of large, as measured by volume, e-commerce vendors.

7

Q

Volume of sales?

8

A

Volume of sales.

9

There are a huge

number of small vendors as measured by volume of

10

sales, and that is -- that information is drawn from

11

this report.
Q

12
13

okay.

I believe that you also cite

the Long Tail Study in your 2009 report, Exhibit 96.

14

A

I'm sure we do.

15

Q

And if you'll get that document,

16

I'll find the reference I'm looking for.

Marked as

17

an exhibit, the one that has some highlighting in

18

it, which is fine with me.
A

Page 5, is that what you're looking

21

Q

It could be.

22

A

Second paragraph.

23

Q

Thank you.

19
20

24

l,

25

for?

So in the second paragraph on Page
20 of Exhibit 96, there is a similar statement you

Truesdel & Rusk

55

.

1

make:

2

the results from the Maryland Long Tail study."

"The vendor tax compliance was informed using

3

And then it goes on to say:

4

"The study evidences that

5
6

large vendors, 20 percent by medium size

7

vendors that generally maintain their own

8

website and have annual gross receipts

9

between $1 million and $10 million, and

10

43 percent by vendors that operate on a

11

platform other than their own and have sales

12

(

37 percent of e-commerce is conducted by

under $1 million."
Did I read that right?

13
14

A

Yes.

15

Q

And is that the principle on which

16

you -- for which you rely on the Maryland Long Tail

17

Study?

18

A

Yes.

19

Q

So, in other words, you're using it

20

to determine relative amounts of electronic commerce

21

conducted within those three segments of businesses?

22
23
24

(

25

A

Yes.

I mean, that is -- we do use

the information the way you just described it, yes.
Q

So the three groups are over ten

million in annual sales, gross receipts or sales

Truesdel " Rusk

56

1

between one and ten million, and gross receipts

2

under one million?

3

A

Yes.

4

(

Q

Okay.

Now, the study is marked

5

draft, but do you consider the study, the Maryland

6

Long Tail Study,

7

in its estimate of the amount of e-commerce sales in

8

each of those groups that I just listed?
A

9

to be a reliable -- to be reliable

Well, you know, at the time I read

10
11

by people, who had, you know, worked a lot on

12

(

it, the methodology seemed reasonable and was done

internet-based issues and so we did accept that as a

13

reasonable estimate, yes.

Q

14
15

Okay.

And you relied on it in your

report that's marked as Exhibit 95 in this case?

16

A

Yes.

17

Q

So you continue to think it's

18

reasonable, at least as of preparing that report?

19

A

Yes.

20

Q

And I assume as you're sitting here

22

A

Yes.

23

Q

And what the Maryland Long Tail

21

now?

24

l

Study shows is there is a significant amount of

25

electronic commerce that is conducted by firms with

Truesdel & Rusk

57

(

1

sales under $1,000,000?

2

A

Yes.

3

Q

By your calculation from the study,

4

43 percent, in fact, of e-commerce is conducted by

5

firms with sales under one million?

6

A

From their calculations, yes.

7

Q

From the Maryland Long Tail study.

8

A

Yes.

9

Q

Now -- and you've used that number

10
11

million in preparing your 2009 report and in

12

(

yourself, that estimate of 43 percent of below one

connection with your report in this case?

13

A

That's correct.

14

Q

Now, on Page 20 of your report from

15

2009, you also indicate at the end of that same

16

paragraph that you assume that small vendors only

17

comply part of the time, even within their home

18

states, you assume a one percent compliance?

19

A

Yes.

20

Q

So in addition to there being a

21

22

one million, total e-commerce sales being something

23

like 43 percent of all e-commerce sales made by

24

l

fairly high volume of sales among that segment under

firms under a million, those same firms also exhibit

25

low compliance?
.

Truesde1 « Rusk

58

(

1

A

That's correct.

2

Q

Now, so am I correct then, given

3

the high volume of sales among sellers under a

4

million in the aggregate, and their low levels of

5

compliance, that exempting small sellers from the

6

obligation to report sales and use tax will

7

significantly reduce the estimates of uncollected

8

tax that can be obtained?
Well, it doesn't reduce the

9
10

estimates.

11

seller's exception, which said they don't have to

12

(

A

comply and they don't have to pay tax, then you'll

13

reduce what you get from a more -- a broader

14

requirement to collect the tax.

15

It does, however, if you had a small

Q

Okay, that's better stated.

16

So, were you to institute, either

17

an overturning of Quill or some other program that

18

would require the collection of sales and use tax on

19

e-commerce sales by businesses regardless of their

20

nexus, but except from that, those small sellers, it

21

would reduce -MS. SNYDER:

22

Object to the form.

23

And, Matt, you're starting to cut out toward

24

the end.

25

MR. SCHAEFER:

Okay, I think the

Truesdel & Rusk

59

(

1

reason it sounds like I cut out is because

2

I'm trying to form the question.

3

fact,

So -- in

I hadn't finished my question.

4

MS. SNYDER:

Okay, I apologize.

It

5

just got very quiet and I could hear a

6

little bit of noise, I couldn't tell if you

7

were still talking or not.
MR. SCHAEFER:

8

9

Yeah.

I think what

you are probably hearing is the typing or

10

fan noise or something, but let me try

11

again.

12

(

BY MR. SCHAEFER:
Q

13

Dr. Fox, I think you clarified to

14

say essentially that you will -- were you to

15

institute a program requiring the collection of

16

sales and use tax on e-commerce sales, however that

17

might occur, through an overturning of Quill or

18

otherwise, but except from that requirement, small

19

sellers, under a million dollars, it would reduce

20

significantly the amount of additional tax you could

21

collect?

22

23
24

l

25

A

Based on the numbers I've seen,

yes, it would.
Q

And I think you indicate that

elsewhere in your 2009 study, perhaps in a slightly

Truesdel & Rusk

60

(

1

different context, but if you look at Pages 13 and

2

14, you have a section in your 2009 study about

3

small seller exceptions or de minimis exceptions.

4

At the bottom of Page 13 you say,

5

for example, the last paragraph in the middle of

6

Page 13:

7

"This means, for example, that the

8

price tag for a $1 million small vendor

9

exception is 30 percent as large as our

10

estimate of losses in 2012."

11

Did I read that correctly?

12

(

A

You did.

13

Q

okay.

Now, why, if sellers under a

14

million dollars account for 43 percent of all

15

e-commerce sales and have a very low compliance

16

rate, do you estimate a small seller exception set

17

at a million dollars will result in only a

18

30 percent reduction in uncollected tax?

19

A

Well, remember in every case here,

20

we have two levels of compliance that are going on.

21

The first level is compliance by the vendor, and the

22

discussion that we've been having about these small

23

firms refers only to small vendor compliance.

24
25

Then there's this second level of
compliance, which is compliance by the buyer.

Truesde1

I<

Rusk

And

61

(

1

in the case of businesses, we're using about

2

75 percent compliance.

3

complicated function of what happens at that first

4

stage, does the vendor collect it, and then for

5

those sales which the vendor doesn't collect, what

6

kind of compliance do we get by the buyer.

7

steps are going into the calculation and that's why

8

it's not this simple arithmetic that you're looking

9

for here.

So our calculations are a

Both

Plus, we actually assume a higher

10

11
12

(

share of vendor compliance for B to B sales than we
do for B to C sales.

13

referring to from later in my text there on, like

14

around Page 20, is mostly referring to B to C sales.
Q

15

In the part that you're

So the 43 percent estimate is all

16

sales

43 percent of all e-commerce at that level

17

of under a million dollars for the amount of

18

sales -- strike that.
The 43 percent of e-commerce, total

19
20

e-commerce sales represented by sales of firms

21

having sales less than a million is both B to Band

22

B to C?

23

24
25

A

Yeah, that's my understanding from

their study.

Q

Now, on the top of Page 14, you

Truesdel & Rusk

62

(

1

provide a table showing the small vendor exception

2

at different levels of sales for the small vendor?

3

A

That's correct.

4

Q

And your levels of sales are below

5

500,000, below 1,000,000 and below 5,000,000?

6

A

That's correct.

7

Q

And you have calculated the impact

8

on taxes that are available to be collected based on

9

each of those thresholds of small seller exception?

10

A

That's right.

11

Q

And at a $5 million small vendor

12
13

reduction in your estimate of uncollected tax,

14

(

exception causes, not surprisingly, an even larger

correct?

15

A

That's correct.

16

Q

And the percentage, instead of the

17

30 percent you mentioned on the prior page, is

18

something more like 36.85 percent?

19

A

It looks like you've calculated

20

that on the copy I'm looking at, so I'll accept that

21

as correct.

22

Q

And just so you'll know, what I've

23
24

l

done for 2010 was to take your number from your
chart, the Table 8 on Page 14, of 3,177,000,000 and

25

divide it by your estimate from Page 7, baseline

Truesdel & Rusk

63

1

estimate from Page 7 of total estimated state and

2

(

local revenue loss.

3

A

Yes.

4

Q

And so I did the math correctly

6

A

It looks like you did.

7

Q

I picked the right numbers?

8

A

Yes, I think so.

9

Q

The correct numbers for 2010.

5

there?

10

So the impact of that $5 million

11
12

(

small vendor exception would be about a
36.85 percent reduction in available uncollected

13

tax?

14

A

It would be large.

15

Q

You don't have an issue with my

A

It looks correct.

16
17

18
19

math.
I didn't check

it, but it looked like you got the right numbers.
Q

Now, would a small seller exception

20

that was set even higher than five million, say at

21

six million, reduce your estimates of uncollected

22

tax available to the states even more?

23

A

Let me re-emphasize, it's not

24

changing our estimates of uncollected tax, it's

25

changing the estimate of what you might expect to

Truesdel &0 Rusk

64

(

1

collect if you required remote vendors of a

2

particular size to collect at the vendor level.
Q

3

Yes.

But if we except those

4

sellers from the obligation to collect, in effect,

5

the tax -- well, fair enough.

6

further,

7

above five million, it would reduce further the tax

8

available to be collected by the states?

10

if we raised the small seller exception

A

9

It would reduce

The tax that we would expect states

to actually be able to collect.

11

Okay.

12

(

Q
A

Not the amount that is owed.

13

Q

NO.

14

A

That's unaffected by these kinds of

15

assumptions.
Q

16

Right, and I used available and

17

I'll accept your word of able to be collected,

18

that's fine.
But you haven't estimated any

19
20

higher thresholds than five million for a small

21

seller exception?

22

A

We have not.

23

Q

Okay, you haven't estimated six

A

No.

24
25

million?

.

Truesdel & Rusk

65

(

1

Q

Or 6.25 million?

2

A

Nothing higher than five million.

3

To my remembrance at least, I don't remember us

4

doing anything.

5

calculated as I remember.
Q

6

7

There's certainly nothing reported

in Exhibit 96 above five million.
A

8

9

We reported only the numbers we

And I did no work associated with

the small seller exception, per se, on the work for

10

Colorado.

11

Q

Now, are you familiar from your

12

(

work generally in the field with efforts by states

13

to improve use tax reporting and compliance by

14

consumers and businesses?
A

15

I think they're continuing
I'm not a person, who works

16

regularly to do that.

17

on administrative issues, per se, but that's

18

certainly my sense, that states are trying to do

19

that.
Q

21
22

Are you aware of those kinds of

A

20

Well, I mean the one that I'm

efforts?

23

obviously aware of is the efforts by states to

24

include a line on their income tax return, which

25

about 20 states do, that give people an opportunity

Truesdel & Rusk

66

(

1

to report.

The numbers that I have seen over the

2

years suggest very little compliance with that.

3

I think states are continuing to

4

try to improve their auditing techniques, which are

5

applied essentially only to businesses, but the odds

6

again remain very infrequent and of modest success

7

as best I can see.

8

Q

9

So you've identified inclusion of a

use tax line on the individual tax return and audit.

10
11

states to improve use tax compliance and reporting

12

(

Are there any other efforts that you're aware of by

by consumers?

13

14
15

A

Those are the ones that occur to me

off the top of my head.
Q

Have you worked with any states or

16

state departments of revenue in developing consumer

17

compliance initiatives for the use tax?

18

A

No.

19

Q

And are you aware of any other

20

initiatives with regard to business compliance with

21

the use tax that states or state departments of

22

revenue have undertaken?

23

A

Nothing occurs to me.

24

Q

And have you advised any states

(
'-~.--

.

25

with regard to such initiatives for business tax for

Truesdel & Rusk

67

(

1

use tax compliance by businesses?

2

A

No.

3

Q

Now, you mentioned the use tax line

4

on the income tax return as one of those measures.

5

And you estimated about 20 states have such a line?
A

6

There was a study at one point that

7

was available on the FTA website.

My remembrance,

S

though this might be incorrect, is that it was

9

written by a person from the Minnesota Department of

10
11

states.

12

(

Revenue research staff and it had a listing of such

there were over 20 on that list.

13
14

15
16
17

And my remembrance at the time was that

Q

DO you know if Colorado is one of

those states?
A

I think Colorado is not one of

those states.
Q

Is not.
I'm going to mark as the next

1S
19

exhibit, which is Exhibit 101, a document entitled

20

"Use Tax Collection on Income Tax Returns in Other

21

States" from the Research Department of the

22

Minnesota House of Representatives.

23

was updated June 2010.

24

l.

25

This one is

Is this the Minnesota report you
just referred to?

Truesde1

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Rusk

68

(Exhibit No. 101 marked)

1

Except I'm talking about an earlier

A

2

3

draft.

This is one that I saw several years ago,

4

and so thank you for alerting me that this more

5

recent report is available now.
So, in fact, it was updated in

Q

6

Does it appear to be in the same sort of

7

2010.

8

format as you're aware of?

10

I think so.

A

9

Generally it looks

like what I have seen.
Earlier you mentioned that you

Q

11
12
13

use tax compliance efforts.

14

(

advised the legislature in Minnesota on sales and

in the development of this report?
Well, let me be a little more

A

15

Did you have any role

16

precise about what I did.

17

issues in Minnesota, not tax administration issues,

18

which is generally what -- where my expertise lies.

19

And so I have not played any role whatsoever in this

20

report.

21

of it.

22

I testified on tax policy

I was just familiar with an earlier draft

Q

Okay.

And just to clarify the

23
24

(

number you mentioned earlier, you believed it to be
about 20 states, if you look at Page 2 of this

25

report, the third full paragraph indicates that "23

Truesdel & Rusk

75

1

Minnesota's exclusion of clothing from the

2

sales tax base."

3

Q

Do you see that, Dr. Fox?

4

A

I do, yes.

5

Q

Were you aware that Minnesota

6

exempted clothing from the sales tax?
was.

7

A

I

8

Q

Do you know if Colorado exempts

9

clothing from the sale and use tax base?
A

11

If Colorado does not, would you

that.

12

(

I don't think so, but I don't know

Q

10

13

agree with me that it would potentially have

14

higher

15

A

Well --

16

Q

-- revenues than Minnesota subject

A

I'm sure there are many, many other

17

to--

18
19

differences in their tax bases and so I wouldn't

20

just apply a Minnesota result to another state

21

without looking at the characteristics of that

22

state's tax structure and the breadth of its tax

23

base.

24
25

Q

But what the Minnesota House of

Representatives has done here is analyzed all the

Truesdel

« Rusk

85

MR. SCHAEFER:

1

2

back.

3

She can read it

He said it was an issue he hadn't

studied.
THE WITNESS:

4

an opinion.

5

MS. SNYDER:

6

7

Okay.

BY MR. SCHAEFER:
Q

8

9

And I couldn't offer

We've been talking about use tax

compliance by individuals.

with regard to use tax

10
11

that additional audit efforts was one area of

12

activity that states have engaged in to try and

13

increase use tax compliance by businesses, is that

14

(

compliance by businesses, I believe you indicated

right?

15

A

That's correct.

16

Q

Now, am I correct that the

17

overwhelming portion of e-commerce is business to

18

business sales?

19

A

Yes.

20

Q

About what percentage of e-commerce

21
22

is business to business sales?
A

It's over 90.

I think the most

23
24

l

recent number I had seen was 93 percent, recognizing
that we're approximate in the categorization here.

25

Q

Okay.

Now, am I also right that

Truesde1 & Rusk

86

1

businesses tend to -- transactions between

2

businesses tend to less often be subject to sales

3

and use tax?

4

A

Yes.

5

Q

And I think you've already

6

testified today that there tends to be a higher rate

7

of compliance for a use tax among businesses than

8

consumers?

9

A

That's correct.

10

Q

So those two factors, it seems to

11
12

(

me, but you correct me if I'm wrong, would tend to
reduce the relative share of unreported tax by

13

businesses below 93 percent?

14

A

Yes, that's true.

15

Q

Do you know about what portion of

16
17

unreported use tax is by businesses?
A

We don't report that in this study.

18

I believe in one of our earlier studies we had it

19

about 50/50 on a share basis, but we don't report

20

that in this study.

21

Q

So if we took your estimate for

22

Colorado from Exhibit 95, your report in this case,

23

for 2010, 130 million, is it your opinion that it's

24

about 65 million attributable to noncompliance by

25

businesses and about 65 million attributable to

Truesdel & Rusk

r

I

87

1

2

noncompliance by consumers?
A

Again, we didn't report that here

3

and didn't separately calculate the business to

4

business versus business to consumer share, so I

5

can't offer an opinion on that.

6

that it's a much lower share than the 93 percent

7

that's business to business.

8

9

Q

But I

sort of agree

When you say you didn't calculate,

you mean for the 2009 report you didn't do that?

10

A

That's correct.

11

Q

The prior versions of that 2009

12

(

study were

13

you first developed it in 2000, is

that correct?

14

A

That's correct.

15

Q

okay.

17

A

Yes.

18

Q

And an update in 2004?

19

A

That's correct.

20

Q

Do you think it was in the 2004

16

21
22

And then there was an update

in 2001?

report where you had a rough estimate of SO/50?
A

I

did not go back and read any of

23

those reports either in preparation for the

24

deposition or for this report, and that's just

25

my head, that's sort of what I remember, that's why

Truesdel &. Rusk

in

88

(

1

I just -- I'm not sure at all what that number was.

2

But there have been big changes in

3

the relative distribution of e-commerce sales over

4

these years as well as we have better tuned

5

estimates on the tax ability in this latest report,

6

and that's why it's very hard to take a result from

7

an earlier study and apply it specifically to this

8

one.

9

Q

Okay.

Would it be possible to

10
11

noncompliance by businesses from the data that are

12

(

calculate an estimate of the share attributable to

available in the report?

13

A

No.

14

Q

Okay.

Just as an

I want to make

15

sure what piece of information may be missing.

I

16

think you said, and I think the report says it's

17

about 93 percent of all e-commerce is business to

18

business?

19

A

Yes.

20

Q

And we have a number for total

21

e-commerce dollars, right?

22

total dollars and apply the 93 percent to that to

23

try and figure out dollars of e-commerce sales to

24

business; is that a fair statement?

25

A

So we could take the

It is, but the categorization

Truesdel & Rusk

89

(

1

matters a lot here and, you know, we're using

2

Colorado's specific tax ability numbers, so the

3

averages don't apply to Colorado.

4

go in, you know, to the 51 categories of sales we've

5

used in this study, see what's taxable in Colorado

6

and apply it.

7

numbers even to get an average, much less for

8

Colorado because of the specific elements of

9

Colorado's tax structure that are included in this

10
11

We would need to

You know, you can't use the aggregate

analysis.
Q

Okay.

Is it fair to say that a

12

(

substantial portion of the $130 million Colorado

13

estimate for 2010 is attributable to sales between

14

businesses?

15

A

Yes.

16

Q

Okay.
MS. SNYDER:

17

Matt, I didn't hear

18

your question and if there was an answer, I

19

didn't hear it.
MR. SCHAEFER:

20

21
22

rather than -(Whereupon, question and answer read back)
MS. SNYDER:

23

24

25

The question was --

Thank you.

BY MR. SCHAEFER:
Q

So just to make sure, because that

Truesdel & Rusk

90

(

1

sounds like I either misspoke or perhaps it was just

2

the read back, but is it fair to say that your

3

estimate of $130 million for Colorado for 2010, of

4

that 130 million a substantial portion is

5

attributable to noncompliance by businesses?

6

A

Yes.

7

Q

And you are aware that some states

8

have undertaken initiatives to try to improve the

9

compliance by businesses with the use tax?

10

Just generally aware of it, yes.

11

Q

Do you have any states in mind?

12

(

A

A

No.

13

Q

Okay.

14

Are you aware whether or not

California has undertaken any such initiative?

15

A

No.

16

Q

We'll mark as the next document,

17
18

Exhibit 106
A

Just to be clear on what I know and

19

don't know about this, Harley Duncan, who was the

20

former director of the Federation of Tax

21

Administrators, and I wrote a paper for one of the

22

Georgetown Law School symposiums five years ago,

23

four years ago, on issues associated with tax

24

collection.

25

information on various kinds of compliance

In there, we did include some

Truesdel

« Rusk

96

(

1

Q

Would you agree with me that your

2

estimates in your report, Exhibit 95, made differing

3

assumptions than are dictated by the requirements of

4

House Bill 10-1193 with regard to uncollected -- the

5

prospects for -- strike that question.
Under the Colorado law, the

6

7

Colorado Department of Revenue has instituted a de

8

minimis seller exception, have they not?

9

A

Yes.

10

Q

Do your estimates in Exhibit 95,

11
12

(

your report, take into account a de minimis seller
exception?

13

A

No.

14

Q

Would you agree with me that how

15

much revenue Colorado realizes as a result of House

16

Bill 10-1193 and the regulations promulgated by the

17

Department of Revenue to implement it depend

18

directly upon the Department of Revenue's

19

enforcement practices with regard to the law?

20

A

We haven't done -- or I haven't

21

done any study of this particular piece of

22

legislation and what its implications are.

23

Q

Okay.

But how much revenue that

.24

(

the department -- that Colorado could realize would

25

depend directly, would it not, on the Department of

Truesdel & Rusk

97

1

Revenue's enforcement practices?
A

2

As a general statement, I would

3

agree with that.

4

particular legislation, it's not something I've

5

studied.

6

Q

Again, as applied to this

But, for example, you know that the

7

Bill itself does not require sales and use tax

8

reporting by firms located outside of Colorado; that

9

is House Bill 10-1193 does not require that

10

companies located outside of Colorado, without a

11

physical presence in the state, collect

12

Colorado's--

13

MS. SNYDER:

14

couldn't hear your question.
MR. SCHAEFER:

15
16

Q

I'm sorry, Matt, I

Sure.

simply, Dr. Fox, you're aware, are

17

you not, that the law at issue in this case does not

18

require or even purport to require sellers located

19

outside of Colorado, having no physical presence in

20

the state, to collect Colorado sales and use tax?

21
22

A

Yes, I'm aware of that.
MS. SNYDER:

Excuse me, can I have

23

the question read back and the answer, I

24

really just couldn't hear either.

25

(Whereupon, question and answer read back)

Truesdel. " Rusk

98

(

1

BY MR. SCHAEFER:

2

Q

with regard to Colorado's sales and

3

use tax system, are you aware that there are a

4

number of home rule jurisdictions in Colorado that

5

are not administered by the Colorado Department of

6

Revenue?

7

A

Yes,

8

Q

And those home rule jurisdictions

9
10
11

I'm generally aware of that.

in Colorado administer their own sales and use tax,
local sales and use tax system?
A

I have never studied that, but

12

(

that's what I have been told, yes.

13

case in previous times I was told that.

14

Q

Outside of this

Your estimates for Colorado include

15

an estimate of tax collected by such home rule

16

jurisdictions, do they not?

17

18

A

They do.
MR. SCHAEFER:

I'm going to take a

19

short break, I may be quite close to

20

finishing.

21
22
23

THE WITNESS:

okay.

(Recess from 12:21 p.m. to 12:26 p.m.)
MR. SCHAEFER:

Dr. Fox, I'd like to

24

thank you for your time, I don't have any

25

further questions for you.

Truesdel & Rusk