By Oliveira H.B. No. 1845 77R4645 CBH-D A BILL TO BE ENTITLED 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 or in a similar manner. 1-22 (5) "Seller" means a person who sells, leases, or 1-23 rents personal property or services. 1-24 (6) "Use tax" means a use tax administered or computed 2-1 under this subtitle or Subtitle C or in a similar manner. 2-2 Sec. 142.003. LEGISLATIVE FINDING. The legislature finds 2-3 that a simplified sales and use tax system will reduce and over 2-4 time eliminate the burden and costs of all vendors to collect this 2-5 state's sales and use tax. The legislature also finds that this 2-6 state should participate in multistate discussions to review or 2-7 amend the terms of the agreement to simplify and modernize sales 2-8 and use tax administration to reduce the burden of tax compliance 2-9 for all sellers and for all types of commerce. 2-10 Sec. 142.004. NEGOTIATIONS. This state shall enter into 2-11 multistate discussions for the purposes of reviewing or amending 2-12 the agreement embodying the simplification requirements prescribed 2-13 by Section 142.007. This state may be represented by not more than 2-14 four delegates for purposes of those discussions. 2-15 Sec. 142.005. AUTHORITY TO ENTER INTO AGREEMENT. (a) The 2-16 comptroller is authorized and directed to enter into the 2-17 Streamlined Sales and Use Tax Agreement with one or more states to 2-18 simplify and modernize sales and use tax administration in order to 2-19 substantially reduce the burden of tax compliance for all sellers 2-20 and for all types of commerce. In furtherance of the agreement, the 2-21 comptroller may act jointly with other states that are members of 2-22 the agreement to establish standards for certification of a 2-23 certified service provider and certified automated system and 2-24 establish performance standards for multistate sellers. 2-25 (b) The comptroller may take other actions reasonably 2-26 required to implement this chapter, including adopting rules and 2-27 jointly procuring, with other member states, goods and services to 3-1 further the agreement. 3-2 (c) The comptroller or the comptroller's designee may 3-3 represent this state before the other states that are signatories 3-4 to the agreement. 3-5 Sec. 142.006. RELATIONSHIP TO STATE LAW. The agreement 3-6 authorized by this chapter does not, in whole or part, invalidate 3-7 or amend a law of this state. Adoption of the agreement by this 3-8 state does not amend or modify a law of this state. Implementation 3-9 of a condition of the agreement in this state, whether adopted 3-10 before, at, or after membership of this state in the agreement, 3-11 must be by the action of this state. 3-12 Sec. 142.007. AGREEMENT REQUIREMENTS. (a) The comptroller 3-13 may not enter into the agreement authorized by this chapter unless 3-14 the agreement requires each state to comply with the requirements 3-15 prescribed by this section. 3-16 (b) The agreement must set restrictions to limit over time 3-17 the number of state rates. 3-18 (c) The agreement must establish uniform standards for: 3-19 (1) the sourcing of transactions to taxing 3-20 jurisdictions; 3-21 (2) the administration of exempt sales; and 3-22 (3) sales and use tax returns and remittances. 3-23 (d) The agreement must provide a central, electronic 3-24 registration system that allows a seller to register to collect and 3-25 remit sales and use taxes for all signatory states. 3-26 (e) The agreement must provide that registration with the 3-27 central registration system and the collection of sales and use 4-1 taxes in the signatory states will not be used as a factor in 4-2 determining whether the seller has nexus with a state for any tax. 4-3 (f) The agreement must provide for reduction of the burdens 4-4 of complying with local sales and use taxes through: 4-5 (1) restricting variances between the state and local 4-6 tax bases; 4-7 (2) requiring states to administer any sales and use 4-8 taxes levied by local jurisdictions within the state so that 4-9 sellers collecting and remitting these taxes will not have to 4-10 register or file returns with, remit funds to, or be subject to 4-11 independent audits from local taxing jurisdictions; 4-12 (3) restricting the frequency of changes in the local 4-13 sales and use tax rates and setting effective dates for the 4-14 application of local jurisdictional boundary changes to local sales 4-15 and use taxes; and 4-16 (4) providing notice of changes in local sales and use 4-17 tax rates and of changes in the boundaries of local taxing 4-18 jurisdictions. 4-19 (g) The agreement must outline any monetary allowances that 4-20 are to be provided by the states to sellers or certified service 4-21 providers. The agreement must allow for a joint public and private 4-22 sector study of the compliance cost on sellers and certified 4-23 service providers to collect sales and use taxes for state and 4-24 local governments under various levels of complexity to be 4-25 completed by July 1, 2002. 4-26 (h) The agreement must require each state to certify 4-27 compliance with the terms of the agreement before joining and to 5-1 maintain compliance, under the laws of the member state, with all 5-2 provisions of the agreement while a member. 5-3 (i) The agreement must require each state to adopt a uniform 5-4 policy for certified service providers that protects the privacy of 5-5 consumers and maintains the confidentiality of tax information. 5-6 (j) The agreement must provide for the appointment of an 5-7 advisory council of private sector representatives and an advisory 5-8 council of nonmember state representatives to consult with in the 5-9 administration of the agreement. 5-10 Sec. 142.008. COOPERATING SOVEREIGNS. The agreement 5-11 authorized by this chapter is an accord among individual 5-12 cooperating sovereigns in furtherance of their governmental 5-13 functions. The agreement provides a mechanism among the member 5-14 states to establish and maintain a cooperative, simplified system 5-15 for the application and administration of sales and use taxes under 5-16 the duly adopted law of each member state. 5-17 Sec. 142.009. LIMITED BINDING AND BENEFICIAL EFFECT. (a) 5-18 The agreement authorized by this chapter binds and inures only to 5-19 the benefit of this state and the other member states. A person, 5-20 other than a member state, is not an intended beneficiary of the 5-21 agreement. A benefit to a person other than a state is established 5-22 by the law of this state and the other member states and not by the 5-23 terms of the agreement. 5-24 (b) Consistent with Subsection (a), a person does not have a 5-25 cause of action or defense under the agreement or by virtue of this 5-26 state's approval of the agreement. A person may not challenge, in 5-27 any action brought under any law, an action or inaction by any 6-1 department, agency, or other instrumentality of this state, or any 6-2 political subdivision of this state, on the ground that the action 6-3 or inaction is inconsistent with the agreement. 6-4 (c) A law of this state, or the application of the law, may 6-5 not be declared invalid as to any person or circumstance on the 6-6 ground that the provision or application is inconsistent with the 6-7 agreement. 6-8 Sec. 142.010. SELLER AND THIRD PARTY LIABILITY. (a) A 6-9 certified service provider is the agent of a seller, with whom the 6-10 certified service provider has contracted, for the collection and 6-11 remittance of sales and use taxes. As the seller's agent, the 6-12 certified service provider is liable for sales and use tax due each 6-13 member state on all sales transactions the provider processes for 6-14 the seller except as provided by this section. 6-15 (b) A seller that contracts with a certified service 6-16 provider is not liable to this state for sales or use tax due on 6-17 transactions processed by the certified service provider unless the 6-18 seller misrepresented the type of items it sells or committed 6-19 fraud. In the absence of probable cause to believe that the seller 6-20 has committed fraud or made a material misrepresentation, the 6-21 seller is not subject to audit on the transactions processed by the 6-22 certified service provider. A seller is subject to audit for 6-23 transactions not processed by the certified service provider. The 6-24 member states acting jointly may perform a system check of the 6-25 seller and review the seller's procedures to determine if the 6-26 certified service provider's system is functioning properly and the 6-27 extent to which the seller's transactions are being processed by 7-1 the certified service provider. 7-2 (c) A person that provides a certified automated system is 7-3 responsible for the proper functioning of that system and is liable 7-4 to this state for underpayments of tax attributable to errors in 7-5 the functioning of the certified automated system. A seller that 7-6 uses a certified automated system remains responsible and is liable 7-7 to this state for reporting and remitting tax. 7-8 (d) A seller that has a proprietary system for determining 7-9 the amount of tax due on transactions and has signed an agreement 7-10 establishing a performance standard for that system is liable for 7-11 the failure of the system to meet the performance standard. 7-12 SECTION 2. This Act takes effect immediately if it receives 7-13 a vote of two-thirds of all the members elected to each house, as 7-14 provided by Section 39, Article III, Texas Constitution. If this 7-15 Act does not receive the vote necessary for immediate effect, this 7-16 Act takes effect September 1, 2001. 7-17 COMMITTEE AMENDMENT NO. 1 7-18 Amend HB 1845 as follows: Beginning on page 2, line 15, 7-19 strike Section 142.005, Tax Code, as added by the bill, and 7-20 substitute the following: 7-21 Sec. 142.005. AUTHORITY TO ENTER INTO AGREEMENT. (a) The 7-22 comptroller is authorized and directed to participate in the 7-23 development of the Streamlined Sales and Use Tax Agreement with one 7-24 or more states to simplify and modernize sales and use tax 7-25 administration in order to substantially reduce the burden of tax 7-26 compliance for all sellers and for all types of commerce. In the 7-27 development of the agreement, the comptroller may act jointly with 8-1 other states that are members of the agreement to establish 8-2 standards for certification of a certified service provider and 8-3 certified automated system and establish performance standards for 8-4 multistate sellers. 8-5 (b) The comptroller or the comptroller's designee may 8-6 represent this state before the other states that are signatories 8-7 to the agreement. 8-8 Oliveira