76R16366 DAK-F                          
         By Ellis, et al.                                       S.B. No. 441
         Substitute the following for S.B. No. 441:
         By McCall                                          C.S.S.B. No. 441
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the application of the sales and use tax to certain
 1-3     services.
 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 the
 1-8     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 the protocol, to communicate information of all kinds
1-13     by wire or radio.
1-14           Sec. 151.00394.  INTERNET ACCESS SERVICE.  (a)  "Internet
1-15     access service" means a service that enables users to access
1-16     content, information, electronic mail, or other services offered
1-17     over the Internet and may also include access to proprietary
1-18     content, information, and other services as part of a package of
1-19     services offered to consumers.  The term does not include
1-20     telecommunications services.
1-21           (b)  "Internet access service" does not include and the
1-22     exemption under Section 151.325 does not apply to any other taxable
1-23     service listed in Section 151.0101(a) or 151.01011, unless the
 2-1     taxable service is provided in conjunction with and is merely
 2-2     incidental to the provision of Internet access service.
 2-3           (c)  On and after October 1, 1999, "Internet access service"
 2-4     is not included in the definitions of data processing services and
 2-5     information services.
 2-6           SECTION 2.  Section 151.0101(a), Tax Code, is amended to read
 2-7     as follows:
 2-8           (a)  "Taxable services" means:
 2-9                 (1)  amusement services;
2-10                 (2)  cable television services;
2-11                 (3)  personal services;
2-12                 (4)  motor vehicle parking and storage services;
2-13                 (5)  the repair, remodeling, maintenance, and
2-14     restoration of tangible personal property, except:
2-15                       (A)  aircraft;
2-16                       (B)  a ship, boat, or other vessel, other than:
2-17                             (i)  a taxable boat or motor as defined by
2-18     Section 160.001;
2-19                             (ii)  a sports fishing boat; or
2-20                             (iii)  any other vessel used for pleasure;
2-21                       (C)  the repair, maintenance, and restoration of
2-22     a motor vehicle; and
2-23                       (D)  the repair, maintenance, creation, and
2-24     restoration of a computer program, including its development and
2-25     modification, not sold by the person performing the repair,
2-26     maintenance, creation, or restoration service;
2-27                 (6)  telecommunications services;
 3-1                 (7)  credit reporting services;
 3-2                 (8)  debt collection services;
 3-3                 (9)  insurance services;
 3-4                 (10)  [information services;]
 3-5                 [(11)]  real property services;
 3-6                 (11) [(12)  data processing services;]
 3-7                 [(13)]  real property repair and remodeling;
 3-8                 (12) [(14)]  security services;
 3-9                 (13) [and (15)]  telephone answering services; and
3-10                 (14)  Internet access service.
3-11           SECTION 3.  Subchapter A, Chapter 151, Tax Code, is amended
3-12     by adding Section 151.01011 to read as follows:
3-13           Sec. 151.01011.  CERTAIN TEMPORARY TAXABLE SERVICES.  (a)
3-14     "Taxable services" include information services and data processing
3-15     services.
3-16           (b)  This section expires October 1, 2003.
3-17           SECTION 4.  Section 151.0103, Tax Code, is amended to read as
3-18     follows:
3-19           Sec. 151.0103.  TELECOMMUNICATIONS SERVICES.  For the
3-20     purposes of this title only, "telecommunications services" means
3-21     the electronic or electrical transmission, conveyance, routing, or
3-22     reception of sounds, signals, data, or information utilizing wires,
3-23     cable, radio waves, microwaves, satellites, fiber optics, or any
3-24     other method now in existence or that may be devised, including but
3-25     not limited to long-distance telephone service.  The term does not
3-26     include:
3-27                 (1)  the storage of data or information for subsequent
 4-1     retrieval or the processing, or reception and processing, of data
 4-2     or information intended to change its form or content;  [or]
 4-3                 (2)  the sale or use of a telephone prepaid calling
 4-4     card; or
 4-5                 (3)  Internet access service.
 4-6           SECTION 5.  Section 151.320(b), Tax Code, is amended to read
 4-7     as follows:
 4-8           (b)  "Magazine" means a publication that is usually
 4-9     paperbacked and sometimes illustrated, that appears at a regular
4-10     interval, and that contains stories, articles, and essays by
4-11     various writers and advertisements.  ["Magazine" does not mean the
4-12     publication of current information which is taxable pursuant to
4-13     Section 151.0038 of this code as an "information service."]
4-14           SECTION 6.  Subchapter H, Chapter 151, Tax Code, is amended
4-15     by adding Section 151.325 to read as follows:
4-16           Sec. 151.325.  BASIC FEE FOR INTERNET ACCESS SERVICE.
4-17     (a)  The sale, use, or other consumption in this state of Internet
4-18     access service is exempted from the taxes imposed by this chapter
4-19     in an amount not to exceed the first $25 of a monthly charge.
4-20           (b)  The exemption provided by this section applies without
4-21     regard to:
4-22                 (1)  whether the Internet access service is bundled
4-23     with another service, including any other taxable service listed in
4-24     Section 151.0101(a) or 151.01011; or
4-25                 (2)  the billing period used by the service provider.
4-26           (c)  The exemption in this section applies to the total sales
4-27     price the service provider charges for Internet access to a
 5-1     purchaser, without regard to whether the service provider charges
 5-2     one lump-sum amount or separately bills the purchaser for each
 5-3     user.
 5-4           SECTION 7.  Subchapter H, Chapter 151, Tax Code, is amended
 5-5     by adding Section 151.351 to read as follows:
 5-7     SERVICES.  (a)  Information services and data processing services
 5-8     are exempted from the taxes imposed by this chapter as follows:
 5-9                 (1)  for services rendered on or after January 1, 2000,
5-10     and before October 1, 2000, 20 percent of the value of the services
5-11     is exempt;
5-12                 (2)  for services rendered on or after October 1, 2000,
5-13     and before October 1, 2001, 40 percent of the value of the services
5-14     is exempt;
5-15                 (3)  for services rendered on or after October 1, 2001,
5-16     and before October 1, 2002, 60 percent of the value of the services
5-17     is exempt; and
5-18                 (4)  for services rendered on or after October 1, 2002,
5-19     and before October 1, 2003, 80 percent of the value of the services
5-20     is exempt.
5-21           (b)  This section expires October 1, 2003.
5-22           SECTION 8.  Sections 151.0035 and 151.0038, Tax Code, are
5-23     repealed.
5-24           SECTION 9.  (a)  Except as otherwise provided by this Act,
5-25     this Act takes effect October 1, 1999.
5-26           (b)  Sections 5 and 8 of this Act take effect October 1,
5-27     2003.
 6-1           (c)  The change in law made by this Act does not affect taxes
 6-2     imposed before the effective date of this Act, and the law in
 6-3     effect before the effective date of this Act is continued in effect
 6-4     for purposes of the liability for and collection of those taxes.
 6-5           SECTION 10.  The importance of this legislation and the
 6-6     crowded condition of the calendars in both houses create an
 6-7     emergency and an imperative public necessity that the
 6-8     constitutional rule requiring bills to be read on three several
 6-9     days in each house be suspended, and this rule is hereby suspended.