1-1 AN ACT 1-2 relating to simplified sales and use tax administration. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Subtitle D, Title 2, Tax Code, is amended by 1-5 adding Chapter 142 to read as follows: 1-6 CHAPTER 142. SIMPLIFIED SALES AND USE TAX ADMINISTRATION ACT 1-7 Sec. 142.001. TITLE. This chapter may be cited as the 1-8 Simplified Sales and Use Tax Administration Act. 1-9 Sec. 142.002. DEFINITIONS. In this chapter: 1-10 (1) "Agreement" means the Streamlined Sales and Use 1-11 Tax Agreement as amended and adopted on January 27, 2001. 1-12 (2) "Certified automated system" means software 1-13 certified jointly by the states that are signatories to the 1-14 agreement to compute the tax imposed by each jurisdiction on a 1-15 transaction, determine the amount of tax to remit to the 1-16 appropriate state, and maintain a record of the transaction. 1-17 (3) "Certified service provider" means an agent 1-18 certified jointly by the states that are signatories to the 1-19 agreement to perform all of the seller's sales tax functions. 1-20 (4) "Sales tax" means a sales tax administered or 1-21 computed under this subtitle or Subtitle C, Title 3, or in a 1-22 similar manner. 1-23 (5) "Seller" means a person who sells, leases, or 1-24 rents personal property or services. 2-1 (6) "Use tax" means a use tax administered or computed 2-2 under this subtitle or Subtitle C, Title 3, or in a similar manner. 2-3 Sec. 142.003. LEGISLATIVE FINDING. The legislature finds 2-4 that a simplified sales and use tax system will reduce and over 2-5 time eliminate the burden and costs of all vendors to collect this 2-6 state's sales and use tax. The legislature also finds that this 2-7 state should participate in multistate discussions to review or 2-8 amend the terms of the agreement to simplify and modernize sales 2-9 and use tax administration to reduce the burden of tax compliance 2-10 for all sellers and for all types of commerce. 2-11 Sec. 142.004. NEGOTIATIONS. This state shall enter into 2-12 multistate discussions for the purposes of reviewing or amending 2-13 the agreement embodying the simplification requirements prescribed 2-14 by Section 142.007. This state may be represented by not more than 2-15 four delegates for purposes of those discussions. 2-16 Sec. 142.005. AUTHORITY TO ENTER INTO AGREEMENT. (a) The 2-17 comptroller is authorized and directed to participate in the 2-18 development of the Streamlined Sales and Use Tax Agreement with one 2-19 or more states to simplify and modernize sales and use tax 2-20 administration in order to substantially reduce the burden of tax 2-21 compliance for all sellers and for all types of commerce. In the 2-22 development of the agreement, the comptroller may act jointly with 2-23 other states that are members of the agreement to establish 2-24 standards for certification of a certified service provider and 2-25 certified automated system and establish performance standards for 2-26 multistate sellers. 2-27 (b) The comptroller or the comptroller's designee may 3-1 represent this state before the other states that are signatories 3-2 to the agreement. 3-3 Sec. 142.006. RELATIONSHIP TO STATE LAW. The agreement 3-4 authorized by this chapter does not, in whole or part, invalidate 3-5 or amend a law of this state. Adoption of the agreement by this 3-6 state does not amend or modify a law of this state. Implementation 3-7 of a condition of the agreement in this state, whether adopted 3-8 before, at, or after membership of this state in the agreement, 3-9 must be by the action of this state. 3-10 Sec. 142.007. AGREEMENT REQUIREMENTS. (a) The comptroller 3-11 may not enter into the agreement authorized by this chapter unless 3-12 the agreement requires each state to comply with the requirements 3-13 prescribed by this section. 3-14 (b) The agreement must set restrictions to limit over time 3-15 the number of state rates. 3-16 (c) The agreement must establish uniform standards for: 3-17 (1) the sourcing of transactions to taxing 3-18 jurisdictions; 3-19 (2) the administration of exempt sales; and 3-20 (3) sales and use tax returns and remittances. 3-21 (d) The agreement must provide a central, electronic 3-22 registration system that allows a seller to register to collect and 3-23 remit sales and use taxes for all signatory states. 3-24 (e) The agreement must provide that registration with the 3-25 central registration system and the collection of sales and use 3-26 taxes in the signatory states will not be used as a factor in 3-27 determining whether the seller has nexus with a state for any tax. 4-1 (f) The agreement must provide for reduction of the burdens 4-2 of complying with local sales and use taxes through: 4-3 (1) restricting variances between the state and local 4-4 tax bases; 4-5 (2) requiring states to administer any sales and use 4-6 taxes levied by local jurisdictions within the state so that 4-7 sellers collecting and remitting these taxes will not have to 4-8 register or file returns with, remit funds to, or be subject to 4-9 independent audits from local taxing jurisdictions; 4-10 (3) restricting the frequency of changes in the local 4-11 sales and use tax rates and setting effective dates for the 4-12 application of local jurisdictional boundary changes to local sales 4-13 and use taxes; and 4-14 (4) providing notice of changes in local sales and use 4-15 tax rates and of changes in the boundaries of local taxing 4-16 jurisdictions. 4-17 (g) The agreement must outline any monetary allowances that 4-18 are to be provided by the states to sellers or certified service 4-19 providers. The agreement must allow for a joint public and private 4-20 sector study of the compliance cost on sellers and certified 4-21 service providers to collect sales and use taxes for state and 4-22 local governments under various levels of complexity to be 4-23 completed by July 1, 2002. 4-24 (h) The agreement must require each state to certify 4-25 compliance with the terms of the agreement before joining and to 4-26 maintain compliance, under the laws of the member state, with all 4-27 provisions of the agreement while a member. 5-1 (i) The agreement must require each state to adopt a uniform 5-2 policy for certified service providers that protects the privacy of 5-3 consumers and maintains the confidentiality of tax information. 5-4 (j) The agreement must provide for the appointment of an 5-5 advisory council of private sector representatives and an advisory 5-6 council of nonmember state representatives to consult with in the 5-7 administration of the agreement. 5-8 Sec. 142.008. COOPERATING SOVEREIGNS. The agreement 5-9 authorized by this chapter is an accord among individual 5-10 cooperating sovereigns in furtherance of their governmental 5-11 functions. The agreement provides a mechanism among the member 5-12 states to establish and maintain a cooperative, simplified system 5-13 for the application and administration of sales and use taxes under 5-14 the duly adopted law of each member state. 5-15 Sec. 142.009. LIMITED BINDING AND BENEFICIAL EFFECT. (a) 5-16 The agreement authorized by this chapter binds and inures only to 5-17 the benefit of this state and the other member states. A person, 5-18 other than a member state, is not an intended beneficiary of the 5-19 agreement. A benefit to a person other than a state is established 5-20 by the law of this state and the other member states and not by the 5-21 terms of the agreement. 5-22 (b) Consistent with Subsection (a), a person does not have a 5-23 cause of action or defense under the agreement or by virtue of this 5-24 state's approval of the agreement. A person may not challenge, in 5-25 any action brought under any law, an action or inaction by any 5-26 department, agency, or other instrumentality of this state, or any 5-27 political subdivision of this state, on the ground that the action 6-1 or inaction is inconsistent with the agreement. 6-2 (c) A law of this state, or the application of the law, may 6-3 not be declared invalid as to any person or circumstance on the 6-4 ground that the provision or application is inconsistent with the 6-5 agreement. 6-6 Sec. 142.010. SELLER AND THIRD PARTY LIABILITY. (a) A 6-7 certified service provider is the agent of a seller, with whom the 6-8 certified service provider has contracted, for the collection and 6-9 remittance of sales and use taxes. As the seller's agent, the 6-10 certified service provider is liable for sales and use tax due each 6-11 member state on all sales transactions the provider processes for 6-12 the seller except as provided by this section. 6-13 (b) A seller that contracts with a certified service 6-14 provider is not liable to this state for sales or use tax due on 6-15 transactions processed by the certified service provider unless the 6-16 seller misrepresented the type of items it sells or committed 6-17 fraud. In the absence of probable cause to believe that the seller 6-18 has committed fraud or made a material misrepresentation, the 6-19 seller is not subject to audit on the transactions processed by the 6-20 certified service provider. A seller is subject to audit for 6-21 transactions not processed by the certified service provider. The 6-22 member states acting jointly may perform a system check of the 6-23 seller and review the seller's procedures to determine if the 6-24 certified service provider's system is functioning properly and the 6-25 extent to which the seller's transactions are being processed by 6-26 the certified service provider. 6-27 (c) A person that provides a certified automated system is 7-1 responsible for the proper functioning of that system and is liable 7-2 to this state for underpayments of tax attributable to errors in 7-3 the functioning of the certified automated system. A seller that 7-4 uses a certified automated system remains responsible and is liable 7-5 to this state for reporting and remitting tax. 7-6 (d) A seller that has a proprietary system for determining 7-7 the amount of tax due on transactions and has signed an agreement 7-8 establishing a performance standard for that system is liable for 7-9 the failure of the system to meet the performance standard. 7-10 SECTION 2. This Act takes effect immediately if it receives 7-11 a vote of two-thirds of all the members elected to each house, as 7-12 provided by Section 39, Article III, Texas Constitution. If this 7-13 Act does not receive the vote necessary for immediate effect, this 7-14 Act takes effect September 1, 2001. _______________________________ _______________________________ President of the Senate Speaker of the House I certify that H.B. No. 1845 was passed by the House on May 5, 2001, by the following vote: Yeas 139, Nays 1, 2 present, not voting. _______________________________ Chief Clerk of the House I certify that H.B. No. 1845 was passed by the Senate on May 23, 2001, by the following vote: Yeas 30, Nays 0, 1 present, not voting. _______________________________ Secretary of the Senate APPROVED: __________________________ Date __________________________ Governor