1-1     By:  Van de Putte, Ellis                              S.B. No. 1184
 1-2           (In the Senate - Filed March 6, 2001; March 8, 2001, read
 1-3     first time and referred to Committee on Finance; April 30, 2001,
 1-4     reported adversely, with favorable Committee Substitute by the
 1-5     following vote:  Yeas 11, Nays 0; April 30, 2001, sent to printer.)
 1-6     COMMITTEE SUBSTITUTE FOR S.B. No. 1184                   By:  Truan
 1-7                            A BILL TO BE ENTITLED
 1-8                                   AN ACT
 1-9     relating to simplified sales and use tax administration.
1-10           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11           SECTION 1.  Subtitle D, Title 2, Tax Code, is amended by
1-12     adding Chapter 142 to read as follows:
1-13        CHAPTER 142.  SIMPLIFIED SALES AND USE TAX ADMINISTRATION ACT
1-14           Sec. 142.001.  TITLE.  This chapter may be cited as the
1-15     Simplified Sales and Use Tax Administration Act.
1-16           Sec. 142.002.  DEFINITIONS.  In this chapter:
1-17                 (1)  "Agreement" means the Streamlined Sales and Use
1-18     Tax Agreement as amended and adopted on January 27, 2001.
1-19                 (2)  "Certified automated system" means software
1-20     certified jointly by the states that are signatories to the
1-21     agreement to compute the tax imposed by each jurisdiction on a
1-22     transaction, determine the amount of tax to remit to the
1-23     appropriate state, and maintain a record of the transaction.
1-24                 (3)  "Certified service provider" means an agent
1-25     certified jointly by the states that are signatories to the
1-26     agreement to perform all of the seller's sales tax functions.
1-27                 (4)  "Sales tax" means a sales tax administered or
1-28     computed under this subtitle or Subtitle C, Title 3, or in a
1-29     similar manner.
1-30                 (5)  "Seller" means a person who sells, leases, or
1-31     rents personal property or services.
1-32                 (6)  "Use tax" means a use tax administered or computed
1-33     under this subtitle or Subtitle C, Title 3, or in a similar manner.
1-34           Sec. 142.003.  LEGISLATIVE FINDING.  The legislature finds
1-35     that  a simplified sales and use tax system will reduce and over
1-36     time eliminate the burden and costs of all vendors to collect this
1-37     state's sales and use tax.  The legislature also finds that this
1-38     state should participate in multistate discussions to review or
1-39     amend the terms of the agreement to simplify and modernize sales
1-40     and use tax administration to reduce the burden of tax compliance
1-41     for all sellers and for all types of commerce.
1-42           Sec. 142.004.  NEGOTIATIONS.  This state shall enter into
1-43     multistate discussions for the purposes of reviewing or amending
1-44     the agreement embodying the simplification requirements prescribed
1-45     by Section 142.007.  This state may be represented by not more than
1-46     four delegates for purposes of those discussions.
1-47           Sec. 142.005.  AUTHORITY TO ENTER INTO AGREEMENT.  (a)  The
1-48     comptroller is authorized and directed to participate in the
1-49     development of the Streamlined Sales and Use Tax Agreement with one
1-50     or more states to simplify and modernize sales and use tax
1-51     administration in order to substantially reduce the burden of tax
1-52     compliance for all sellers and for all types of commerce.  In the
1-53     development of the agreement, the comptroller may act jointly with
1-54     other states that are members of the agreement to establish
1-55     standards for certification of a certified service provider and
1-56     certified automated system and establish performance standards for
1-57     multistate sellers.
1-58           (b)  The comptroller or the comptroller's designee may
1-59     represent this state before the other states that are signatories
1-60     to the agreement.
1-61           Sec. 142.006.  RELATIONSHIP TO STATE LAW.  The agreement
1-62     authorized by this chapter does not, in whole or part, invalidate
1-63     or amend a law of this state.  Adoption of the agreement by this
1-64     state does not amend or modify a law of this state.  Implementation
 2-1     of a condition of the agreement in this state, whether adopted
 2-2     before, at, or after membership of this state in the agreement,
 2-3     must be by the action of this state.
 2-4           Sec. 142.007.  AGREEMENT REQUIREMENTS.  (a)  The comptroller
 2-5     may not enter into the agreement authorized by this chapter unless
 2-6     the agreement requires each state to comply with the requirements
 2-7     prescribed by this section.
 2-8           (b)  The agreement must set restrictions to limit over time
 2-9     the number of state rates.
2-10           (c)  The agreement must establish uniform standards for:
2-11                 (1)  the sourcing of transactions to taxing
2-12     jurisdictions;
2-13                 (2)  the administration of exempt sales; and
2-14                 (3)  sales and use tax returns and remittances.
2-15           (d)  The agreement must provide a central, electronic
2-16     registration system that allows a seller to register to collect and
2-17     remit sales and use taxes for all signatory states.
2-18           (e)  The agreement must provide that registration with the
2-19     central registration system and the collection of sales and use
2-20     taxes in the signatory states will not be used as a factor in
2-21     determining whether the seller has nexus with a state for any tax.
2-22           (f)  The agreement must provide for reduction of the burdens
2-23     of complying with local sales and use taxes through:
2-24                 (1)  restricting variances between the state and local
2-25     tax bases;
2-26                 (2)  requiring states to administer any sales and use
2-27     taxes levied by local jurisdictions within the state so that
2-28     sellers collecting and remitting these taxes will not have to
2-29     register or file returns with, remit funds to, or be subject to
2-30     independent audits from local taxing jurisdictions;
2-31                 (3)  restricting the frequency of changes in the local
2-32     sales and use tax rates and setting effective dates for the
2-33     application of local jurisdictional boundary changes to local sales
2-34     and use taxes; and
2-35                 (4)  providing notice of changes in local sales and use
2-36     tax rates and of changes in the boundaries of local taxing
2-37     jurisdictions.
2-38           (g)  The agreement must outline any monetary allowances that
2-39     are to be provided by the states to sellers or certified service
2-40     providers.  The agreement must allow for a joint public and private
2-41     sector study of the compliance cost on sellers and certified
2-42     service providers to collect sales and use taxes for state and
2-43     local governments under various levels of complexity to be
2-44     completed by July 1, 2002.
2-45           (h)  The agreement must require each state to certify
2-46     compliance with the terms of the agreement before joining and to
2-47     maintain compliance, under the laws of the member state, with all
2-48     provisions of the agreement while a member.
2-49           (i)  The agreement must require each state to adopt a uniform
2-50     policy for certified service providers that protects the privacy of
2-51     consumers and maintains the confidentiality of tax information.
2-52           (j)  The agreement must provide for the appointment of an
2-53     advisory council of private sector representatives and an advisory
2-54     council of nonmember state representatives to consult with in the
2-55     administration of the agreement.
2-56           Sec. 142.008.  COOPERATING SOVEREIGNS.  The agreement
2-57     authorized by this chapter is an accord among individual
2-58     cooperating sovereigns in furtherance of their governmental
2-59     functions.  The agreement provides a mechanism among the member
2-60     states to establish and maintain a cooperative, simplified system
2-61     for the application and administration of sales and use taxes under
2-62     the duly adopted law of each member state.
2-63           Sec. 142.009.  LIMITED BINDING AND BENEFICIAL EFFECT.
2-64     (a)  The agreement authorized by this chapter binds and inures only
2-65     to the benefit of this state and the other member states.  A
2-66     person, other than a member state, is not an intended beneficiary
2-67     of the agreement.  A benefit to a person other than a state is
2-68     established by the law of this state and the other member states
2-69     and not by the terms of the agreement.
 3-1           (b)  Consistent with Subsection (a), a person does not have a
 3-2     cause of action or defense under the agreement or by virtue of this
 3-3     state's approval of the agreement.  A person may not challenge, in
 3-4     any action brought under any law, an action or inaction by any
 3-5     department, agency, or other instrumentality of this state, or any
 3-6     political subdivision of this state, on the ground that the action
 3-7     or inaction is inconsistent with the agreement.
 3-8           (c)  A law of this state, or the application of the law, may
 3-9     not be declared invalid as to any person or circumstance on the
3-10     ground that the provision or application is inconsistent with the
3-11     agreement.
3-12           Sec. 142.010.  SELLER AND THIRD PARTY LIABILITY.  (a)  A
3-13     certified service provider is the agent of a seller, with whom the
3-14     certified service provider has contracted, for the collection and
3-15     remittance of sales and use taxes.  As the seller's agent, the
3-16     certified service provider is liable for sales and use tax due each
3-17     member state on all sales transactions the provider processes for
3-18     the seller except as provided by this section.
3-19           (b)  A seller that contracts with a certified service
3-20     provider is not liable to this state for sales or use tax due on
3-21     transactions processed by the certified service provider unless the
3-22     seller misrepresented the type of items it sells or committed
3-23     fraud.  In the absence of probable cause to believe that the seller
3-24     has committed fraud or made a material misrepresentation, the
3-25     seller is not subject to audit on the transactions processed by the
3-26     certified service provider.  A seller is subject to audit for
3-27     transactions not processed by the certified service provider.  The
3-28     member states acting jointly may perform a system check of the
3-29     seller and review the seller's procedures to determine if the
3-30     certified service provider's system is functioning properly and the
3-31     extent to which the seller's transactions are being processed by
3-32     the certified service provider.
3-33           (c)  A person that provides a certified automated system is
3-34     responsible for the proper functioning of that system and is liable
3-35     to this state for underpayments of tax attributable to errors in
3-36     the functioning of the certified automated system.  A seller that
3-37     uses a certified automated system remains responsible and is liable
3-38     to this state for reporting and remitting tax.
3-39           (d)  A seller that has a proprietary system for determining
3-40     the amount of tax due on transactions and has signed an agreement
3-41     establishing a performance standard for that system is liable for
3-42     the failure of the system to meet the performance standard.
3-43           SECTION 2.  This Act takes effect immediately if it receives
3-44     a vote of two-thirds of all the members elected to each house, as
3-45     provided by Section 39, Article III, Texas Constitution.  If this
3-46     Act does not receive the vote necessary for immediate effect, this
3-47     Act takes effect September 1, 2001.
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