1-1 By: Oliveira (Senate Sponsor - Van de Putte) H.B. No. 1845 1-2 (In the Senate - Received from the House May 7, 2001; 1-3 May 7, 2001, read first time and referred to Committee on Finance; 1-4 May 11, 2001, reported favorably by the following vote: Yeas 11, 1-5 Nays 0; May 11, 2001, sent to printer.) 1-6 A BILL TO BE ENTITLED 1-7 AN ACT 1-8 relating to simplified sales and use tax administration. 1-9 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-10 SECTION 1. Subtitle D, Title 2, Tax Code, is amended by 1-11 adding Chapter 142 to read as follows: 1-12 CHAPTER 142. SIMPLIFIED SALES AND USE TAX ADMINISTRATION ACT 1-13 Sec. 142.001. TITLE. This chapter may be cited as the 1-14 Simplified Sales and Use Tax Administration Act. 1-15 Sec. 142.002. DEFINITIONS. In this chapter: 1-16 (1) "Agreement" means the Streamlined Sales and Use 1-17 Tax Agreement as amended and adopted on January 27, 2001. 1-18 (2) "Certified automated system" means software 1-19 certified jointly by the states that are signatories to the 1-20 agreement to compute the tax imposed by each jurisdiction on a 1-21 transaction, determine the amount of tax to remit to the 1-22 appropriate state, and maintain a record of the transaction. 1-23 (3) "Certified service provider" means an agent 1-24 certified jointly by the states that are signatories to the 1-25 agreement to perform all of the seller's sales tax functions. 1-26 (4) "Sales tax" means a sales tax administered or 1-27 computed under this subtitle or Subtitle C, Title 3, or in a 1-28 similar manner. 1-29 (5) "Seller" means a person who sells, leases, or 1-30 rents personal property or services. 1-31 (6) "Use tax" means a use tax administered or computed 1-32 under this subtitle or Subtitle C, Title 3, or in a similar manner. 1-33 Sec. 142.003. LEGISLATIVE FINDING. The legislature finds 1-34 that a simplified sales and use tax system will reduce and over 1-35 time eliminate the burden and costs of all vendors to collect this 1-36 state's sales and use tax. The legislature also finds that this 1-37 state should participate in multistate discussions to review or 1-38 amend the terms of the agreement to simplify and modernize sales 1-39 and use tax administration to reduce the burden of tax compliance 1-40 for all sellers and for all types of commerce. 1-41 Sec. 142.004. NEGOTIATIONS. This state shall enter into 1-42 multistate discussions for the purposes of reviewing or amending 1-43 the agreement embodying the simplification requirements prescribed 1-44 by Section 142.007. This state may be represented by not more than 1-45 four delegates for purposes of those discussions. 1-46 Sec. 142.005. AUTHORITY TO ENTER INTO AGREEMENT. (a) The 1-47 comptroller is authorized and directed to participate in the 1-48 development of the Streamlined Sales and Use Tax Agreement with one 1-49 or more states to simplify and modernize sales and use tax 1-50 administration in order to substantially reduce the burden of tax 1-51 compliance for all sellers and for all types of commerce. In the 1-52 development of the agreement, the comptroller may act jointly with 1-53 other states that are members of the agreement to establish 1-54 standards for certification of a certified service provider and 1-55 certified automated system and establish performance standards for 1-56 multistate sellers. 1-57 (b) The comptroller or the comptroller's designee may 1-58 represent this state before the other states that are signatories 1-59 to the agreement. 1-60 Sec. 142.006. RELATIONSHIP TO STATE LAW. The agreement 1-61 authorized by this chapter does not, in whole or part, invalidate 1-62 or amend a law of this state. Adoption of the agreement by this 1-63 state does not amend or modify a law of this state. Implementation 1-64 of a condition of the agreement in this state, whether adopted 2-1 before, at, or after membership of this state in the agreement, 2-2 must be by the action of this state. 2-3 Sec. 142.007. AGREEMENT REQUIREMENTS. (a) The comptroller 2-4 may not enter into the agreement authorized by this chapter unless 2-5 the agreement requires each state to comply with the requirements 2-6 prescribed by this section. 2-7 (b) The agreement must set restrictions to limit over time 2-8 the number of state rates. 2-9 (c) The agreement must establish uniform standards for: 2-10 (1) the sourcing of transactions to taxing 2-11 jurisdictions; 2-12 (2) the administration of exempt sales; and 2-13 (3) sales and use tax returns and remittances. 2-14 (d) The agreement must provide a central, electronic 2-15 registration system that allows a seller to register to collect and 2-16 remit sales and use taxes for all signatory states. 2-17 (e) The agreement must provide that registration with the 2-18 central registration system and the collection of sales and use 2-19 taxes in the signatory states will not be used as a factor in 2-20 determining whether the seller has nexus with a state for any tax. 2-21 (f) The agreement must provide for reduction of the burdens 2-22 of complying with local sales and use taxes through: 2-23 (1) restricting variances between the state and local 2-24 tax bases; 2-25 (2) requiring states to administer any sales and use 2-26 taxes levied by local jurisdictions within the state so that 2-27 sellers collecting and remitting these taxes will not have to 2-28 register or file returns with, remit funds to, or be subject to 2-29 independent audits from local taxing jurisdictions; 2-30 (3) restricting the frequency of changes in the local 2-31 sales and use tax rates and setting effective dates for the 2-32 application of local jurisdictional boundary changes to local sales 2-33 and use taxes; and 2-34 (4) providing notice of changes in local sales and use 2-35 tax rates and of changes in the boundaries of local taxing 2-36 jurisdictions. 2-37 (g) The agreement must outline any monetary allowances that 2-38 are to be provided by the states to sellers or certified service 2-39 providers. The agreement must allow for a joint public and private 2-40 sector study of the compliance cost on sellers and certified 2-41 service providers to collect sales and use taxes for state and 2-42 local governments under various levels of complexity to be 2-43 completed by July 1, 2002. 2-44 (h) The agreement must require each state to certify 2-45 compliance with the terms of the agreement before joining and to 2-46 maintain compliance, under the laws of the member state, with all 2-47 provisions of the agreement while a member. 2-48 (i) The agreement must require each state to adopt a uniform 2-49 policy for certified service providers that protects the privacy of 2-50 consumers and maintains the confidentiality of tax information. 2-51 (j) The agreement must provide for the appointment of an 2-52 advisory council of private sector representatives and an advisory 2-53 council of nonmember state representatives to consult with in the 2-54 administration of the agreement. 2-55 Sec. 142.008. COOPERATING SOVEREIGNS. The agreement 2-56 authorized by this chapter is an accord among individual 2-57 cooperating sovereigns in furtherance of their governmental 2-58 functions. The agreement provides a mechanism among the member 2-59 states to establish and maintain a cooperative, simplified system 2-60 for the application and administration of sales and use taxes under 2-61 the duly adopted law of each member state. 2-62 Sec. 142.009. LIMITED BINDING AND BENEFICIAL EFFECT. (a) 2-63 The agreement authorized by this chapter binds and inures only to 2-64 the benefit of this state and the other member states. A person, 2-65 other than a member state, is not an intended beneficiary of the 2-66 agreement. A benefit to a person other than a state is established 2-67 by the law of this state and the other member states and not by the 2-68 terms of the agreement. 2-69 (b) Consistent with Subsection (a), a person does not have a 3-1 cause of action or defense under the agreement or by virtue of this 3-2 state's approval of the agreement. A person may not challenge, in 3-3 any action brought under any law, an action or inaction by any 3-4 department, agency, or other instrumentality of this state, or any 3-5 political subdivision of this state, on the ground that the action 3-6 or inaction is inconsistent with the agreement. 3-7 (c) A law of this state, or the application of the law, may 3-8 not be declared invalid as to any person or circumstance on the 3-9 ground that the provision or application is inconsistent with the 3-10 agreement. 3-11 Sec. 142.010. SELLER AND THIRD PARTY LIABILITY. (a) A 3-12 certified service provider is the agent of a seller, with whom the 3-13 certified service provider has contracted, for the collection and 3-14 remittance of sales and use taxes. As the seller's agent, the 3-15 certified service provider is liable for sales and use tax due each 3-16 member state on all sales transactions the provider processes for 3-17 the seller except as provided by this section. 3-18 (b) A seller that contracts with a certified service 3-19 provider is not liable to this state for sales or use tax due on 3-20 transactions processed by the certified service provider unless the 3-21 seller misrepresented the type of items it sells or committed 3-22 fraud. In the absence of probable cause to believe that the seller 3-23 has committed fraud or made a material misrepresentation, the 3-24 seller is not subject to audit on the transactions processed by the 3-25 certified service provider. A seller is subject to audit for 3-26 transactions not processed by the certified service provider. The 3-27 member states acting jointly may perform a system check of the 3-28 seller and review the seller's procedures to determine if the 3-29 certified service provider's system is functioning properly and the 3-30 extent to which the seller's transactions are being processed by 3-31 the certified service provider. 3-32 (c) A person that provides a certified automated system is 3-33 responsible for the proper functioning of that system and is liable 3-34 to this state for underpayments of tax attributable to errors in 3-35 the functioning of the certified automated system. A seller that 3-36 uses a certified automated system remains responsible and is liable 3-37 to this state for reporting and remitting tax. 3-38 (d) A seller that has a proprietary system for determining 3-39 the amount of tax due on transactions and has signed an agreement 3-40 establishing a performance standard for that system is liable for 3-41 the failure of the system to meet the performance standard. 3-42 SECTION 2. This Act takes effect immediately if it receives 3-43 a vote of two-thirds of all the members elected to each house, as 3-44 provided by Section 39, Article III, Texas Constitution. If this 3-45 Act does not receive the vote necessary for immediate effect, this 3-46 Act takes effect September 1, 2001. 3-47 * * * * *