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
1
2
3
4
THE DIRECT MARKETING ASSOCIATION,
5
6
Plaintiff,
v.
CIVIL ACTION NO.
10-cv-01546-REB-CBS
7
8
9
10
ROXY HUBER, in her capacity
as Executive Director, Colorado
Department of Revenue,
Defendant.
11
12
/\
..
13
* * * * * * * * * * * * * * * *
14
15
DEPOSITION OF WILLIAM F. FOX
16
17
November 16th, 2010
18
19
20
21
22
23
=====================================================
TRUESDEL & RUSK
Registered Professional Reporters
Ginger Truesdel, RPR, RDR, CRR
Certified Realtime Reporter
LCR #003
7047 Duncan's Glen Drive
Knoxville, Tennessee 37919
(865) 450-9772
24
25
www.truesdelrusk.com
gingertrue@comcast.net
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.
22
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
29
(
1
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
31
(
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
54
(
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
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