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. 3-48 * * * * *