If federal law is changed to allow the collection of state sales taxes on out-of-state retailers (the Marketplace Fairness Act), the 2013-15 state budget requires revenue generated from this source be automatically used to further lower the state income tax brackets.
If the federal law was enacted, the state Department of Revenue (DOR) would determine how much additional sales tax revenue was collected from this source during the first year following the initial collection of the new revenue.
After estimating the amount of additional sales tax revenue, DOR would determine how much the individual income tax brackets could be reduced in the following tax year so that the state alternative minimum tax (AMT) would be eliminated and income taxes would be cut by an amount equal to the additional sales tax revenue. The individual income tax rate reductions would be calculated using a proportion of the share of gross tax attributed to each of the tax brackets in effect during the most recently finished tax year.
Finally, DOR would certify the revenue estimates and rate reductions to DOA, the Governor, and Legislature. The elimination of the AMT and the new reduced tax rates would take effect in the tax year following after the certification by DOR.
