By Ogden S.B. No. 341
76R3817 DAK-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to taxing the sale, use, or consumption of Internet access
1-3 service.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subchapter A, Chapter 151, Tax Code, is amended
1-6 by adding Sections 151.00393 and 151.00394 to read as follows:
1-7 Sec. 151.00393. "INTERNET." "Internet" means collectively
1-8 the myriad of computer and telecommunications facilities, including
1-9 equipment and operating software, that comprise the interconnected
1-10 worldwide network of networks that employ the Transmission Control
1-11 Protocol/Internet Protocol, or any predecessor or successor
1-12 protocols to that protocol, to communicate information of all kinds
1-13 by wire or radio.
1-14 Sec. 151.00394. "INTERNET ACCESS SERVICE." "Internet access
1-15 service" means a service that enables users to access content,
1-16 information, electronic mail, or other services offered over the
1-17 Internet and may also include access to proprietary content,
1-18 information, and other services as part of a package of services
1-19 offered to consumers.
1-20 SECTION 2. Section 151.0101(a), Tax Code, is amended to read
1-21 as follows:
1-22 (a) "Taxable services" means:
1-23 (1) amusement services;
1-24 (2) cable television services;
2-1 (3) personal services;
2-2 (4) motor vehicle parking and storage services;
2-3 (5) the repair, remodeling, maintenance, and
2-4 restoration of tangible personal property, except:
2-5 (A) aircraft;
2-6 (B) a ship, boat, or other vessel, other than:
2-7 (i) a taxable boat or motor as defined by
2-8 Section 160.001;
2-9 (ii) a sports fishing boat; or
2-10 (iii) any other vessel used for pleasure;
2-11 (C) the repair, maintenance, and restoration of
2-12 a motor vehicle; and
2-13 (D) the repair, maintenance, creation, and
2-14 restoration of a computer program, including its development and
2-15 modification, not sold by the person performing the repair,
2-16 maintenance, creation, or restoration service;
2-17 (6) telecommunications services;
2-18 (7) credit reporting services;
2-19 (8) debt collection services;
2-20 (9) insurance services;
2-21 (10) information services;
2-22 (11) real property services;
2-23 (12) data processing services;
2-24 (13) real property repair and remodeling;
2-25 (14) security services; [and]
2-26 (15) telephone answering services; and
2-27 (16) Internet access service other than on-ramp
3-1 Internet access service exempted by Section 151.325.
3-2 SECTION 3. Subchapter C, Chapter 151, Tax Code, is amended
3-3 by adding Section 151.061 to read as follows:
3-4 Sec. 151.061. BUNDLING OF CERTAIN SERVICES. (a) This
3-5 section applies to the sale, use, or consumption in this state of a
3-6 service that bundles on-ramp Internet access service exempt under
3-7 Section 151.325 with any of the following taxable services:
3-8 (1) Internet access service to proprietary information
3-9 or sites that are not freely accessible;
3-10 (2) data processing service;
3-11 (3) information service;
3-12 (4) telecommunications services; and
3-13 (5) cable television service.
3-14 (b) Subject to Subsection (c), for the purpose of
3-15 determining the value of taxable services bundled as described by
3-16 Subsection (a), without regard to whether the bundled services are
3-17 sold for a single price or charged separately, the value of the
3-18 taxable services is computed according to one of the following
3-19 methods that the provider may select:
3-20 (1) the price of the taxable services as offered to
3-21 the public by the provider on an unbundled basis;
3-22 (2) the market price for the taxable services that the
3-23 provider is able to demonstrate as objectively verifiable; or
3-24 (3) the cost of providing the taxable services that
3-25 the provider is able to demonstrate as technologically and
3-26 financially accurate.
3-27 (c) For the purpose of determining the value of taxable
4-1 services bundled as described by Subsection (a), the value of
4-2 exempt Internet on-ramp access service may not be greater than $25
4-3 a month.
4-4 (d) This section expires September 1, 2002.
4-5 SECTION 4. Subchapter H, Chapter 151, Tax Code, is amended
4-6 by adding Section 151.325 to read as follows:
4-7 Sec. 151.325. ON-RAMP INTERNET ACCESS SERVICE. (a) The
4-8 sale, use, or other consumption in this state of Internet access
4-9 service is exempted from the taxes imposed by this chapter only if
4-10 the service is limited to providing an on-ramp connection to
4-11 information and sites that are freely accessible.
4-12 (b) On-ramp Internet access service does not include and the
4-13 exemption under Subsection (a) does not apply to:
4-14 (1) Internet access service to proprietary information
4-15 or sites that are not freely accessible;
4-16 (2) data processing service;
4-17 (3) information service;
4-18 (4) telecommunications services; and
4-19 (5) cable television service.
4-20 (c) A provider of on-ramp Internet access service who
4-21 maintains that the service is covered by the exemption provided in
4-22 this section has the burden of demonstrating that:
4-23 (1) none of the services listed under Subsection (b)
4-24 are provided as part of or otherwise bundled with the on-ramp
4-25 Internet access service; or
4-26 (2) if a service listed under Subsection (b) is
4-27 provided as part of or otherwise bundled with the on-ramp Internet
5-1 access service, the provider has determined the price of the
5-2 taxable service in accordance with Section 151.061 and has
5-3 collected the tax on that service.
5-4 (d) The exemption under this section does not apply to the
5-5 amount by which the value of on-ramp Internet access service is
5-6 greater than $25 a month.
5-7 (e) This section expires September 1, 2002.
5-8 SECTION 5. (a) This Act takes effect on the first day of
5-9 the first calendar quarter beginning on or after the date that it
5-10 may take effect under Section 39, Article III, Texas Constitution.
5-11 (b) The change in law made by this Act does not affect taxes
5-12 imposed before the effective date of this Act, and the law in
5-13 effect before the effective date of this Act is continued in effect
5-14 for purposes of the liability for and collection of those taxes.
5-15 SECTION 6. The importance of this legislation and the
5-16 crowded condition of the calendars in both houses create an
5-17 emergency and an imperative public necessity that the
5-18 constitutional rule requiring bills to be read on three several
5-19 days in each house be suspended, and this rule is hereby suspended,
5-20 and that this Act take effect and be in force according to its
5-21 terms, and it is so enacted.