By: Lindsay S.B. No. 1450
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the collection and enforcement of taxes; providing
1-3 penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subchapter A, Chapter 111, Tax Code, is amended
1-6 by adding Section 111.024 to read as follows:
1-7 Sec. 111.024. RECHARACTERIZING TRANSACTIONS, ACTIVITIES, OR
1-8 RELATIONSHIPS LACKING SUBSTANCE. On a determination by the
1-9 comptroller that a transaction, activity, or relationship or a set
1-10 of related transactions, activities, or relationships does not have
1-11 a significant business purpose or lacks economic substance, the
1-12 comptroller may recharacterize the transaction, activity, or
1-13 relationship and treat it in a manner consistent with its
1-14 underlying nature.
1-15 SECTION 2. Section 151.008(b), Tax Code, is amended to read
1-16 as follows:
1-17 (b) "Seller" and "retailer" include:
1-18 (1) a person in the business of making sales at
1-19 auction of tangible personal property owned by the person or by
1-20 another;
1-21 (2) a person who makes more than two sales of taxable
1-22 items during a 12-month period, including sales made in the
1-23 capacity of an assignee for the benefit of creditors or receiver or
2-1 trustee in bankruptcy;
2-2 (3) a person regarded by the comptroller as a seller
2-3 or retailer under Section 151.024 of this code;
2-4 (4) a hotel, motel, or owner or lessor of an office or
2-5 residential building or development that contracts and pays for
2-6 telecommunications services for resale to guests or tenants; and
2-7 (5) a person who has a physical presence in this state
2-8 and purposefully avails itself of the benefits of the markets in
2-9 this state by soliciting sales from customers located in this state
2-10 by any means, including [engages in regular or systematic
2-11 solicitation of sales of taxable items in this state by] the
2-12 distribution of catalogs, periodicals, advertising flyers,
2-13 electronic images, or other means of advertising through [by means
2-14 of] print, billboard, radio, [or] television [media], [or by] mail,
2-15 telegraphy, telephone, computer data base, cable, optic, microwave,
2-16 or other communication system [for the purpose of effecting sales
2-17 of taxable items].
2-18 SECTION 3. Subchapter A, Chapter 151, Tax Code, is amended
2-19 by adding Sections 151.012 and 151.013 to read as follows:
2-20 Sec. 151.012. PHYSICAL PRESENCE. (a) In this section:
2-21 (1) "Person" includes an individual, corporation,
2-22 limited liability company, partnership, firm, joint venture,
2-23 association, estate, trust, receiver, trustee in bankruptcy,
2-24 syndicate, or any other entity having legal status under the laws
2-25 of this state.
2-26 (2) "Representative" includes an employee, independent
3-1 contractor, or agent of that person acting on behalf of that
3-2 person, or any person that is obligated to provide services or
3-3 warranty repairs to the customers of that person under a
3-4 contractual arrangement with that person. The term does not
3-5 include an independent agent acting as a freight forwarder or
3-6 common carrier in its own business.
3-7 (b) A person has a physical presence in this state for the
3-8 purposes of this chapter if:
3-9 (1) the person, directly or indirectly, owns real or
3-10 tangible property located in this state, other than property
3-11 temporarily in this state for the purpose of fabricating,
3-12 processing, printing, imprinting, or similar activities, if the
3-13 property:
3-14 (A) is used for business purposes;
3-15 (B) has a value of more than $1,000; and
3-16 (C) is present in this state for more than 30
3-17 days during any 12-month period;
3-18 (2) the person or the person's representative
3-19 maintains a place of business in this state, including:
3-20 (A) an office;
3-21 (B) a place of distribution;
3-22 (C) a sales or sample room;
3-23 (D) a warehouse;
3-24 (E) a workshop; or
3-25 (F) a stock of goods or samples;
3-26 (3) the person or the person's representative permits
4-1 the person's customers to return their purchases to a location in
4-2 this state;
4-3 (4) the person or the person's representative makes
4-4 the person's catalogs, brochures, circulars, pamphlets, samples, or
4-5 other advertising material available at a fixed place of business
4-6 of the person or the person's representative that is located in
4-7 this state;
4-8 (5) the person has a representative in this state that
4-9 regularly or systematically solicits or sells on the person's
4-10 behalf;
4-11 (6) the person has a representative in this state that
4-12 regularly or systematically engages in activities on the person's
4-13 behalf that:
4-14 (A) are significantly associated with the
4-15 person's ability to establish or maintain the person's market in
4-16 this state;
4-17 (B) make possible the realization and
4-18 continuation of valuable relations between the person and the
4-19 person's customers;
4-20 (C) are directed at resolving problems regarding
4-21 the use of a product or service sold by the person to customers in
4-22 this state;
4-23 (D) are directed at obtaining or retaining the
4-24 goodwill of the person's customers; or
4-25 (E) provide assistance to a service department
4-26 in this state repairing a product sold by the person in this state;
5-1 (7) the person has a representative in this state
5-2 that:
5-3 (A) regularly or systematically repairs,
5-4 installs, services, or maintains products sold by the person to the
5-5 person's customers located in this state;
5-6 (B) offers technical advice or support with
5-7 respect to those products; or
5-8 (C) holds itself available to perform the
5-9 activities described by Subparagraph (A) or (B) under a warranty
5-10 provided by the person to the person's customers located in this
5-11 state; or
5-12 (8) the person regularly or systematically uses
5-13 trucks, cars, trailers, or other means of transportation that the
5-14 person owns or controls, directly or indirectly, to deliver in this
5-15 state products sold to the person's customers.
5-16 Sec. 151.013. INDIRECT OWNERSHIP OF PROPERTY. (a) In this
5-17 section, "person" has the meaning assigned by Section 151.012.
5-18 (b) A person owns property located in this state for the
5-19 purposes of this chapter if the property is owned by a corporation
5-20 in which the person directly or constructively owns:
5-21 (1) 50 percent or more of the total combined voting
5-22 power of all classes of stock of the corporation entitled to vote;
5-23 or
5-24 (2) 50 percent or more of the total value of the stock
5-25 of that corporation.
5-26 (c) A person owns real or tangible property located in this
6-1 state for the purposes of this chapter if the property is owned:
6-2 (1) by any partnership of which the person is a
6-3 partner; or
6-4 (2) by any trust or estate of which the person is a
6-5 beneficiary.
6-6 (d) In determining ownership interests in a corporation
6-7 under Subsection (b), the person shall apply the constructive
6-8 ownership rules in Section 267(c) or 318(a), Internal Revenue Code,
6-9 as amended, and the application that results in the higher
6-10 ownership percentage is the person's ownership interest in the
6-11 corporation. In making a determination under this subsection, the
6-12 person shall replace the phrase in Section 318(a), "50 percent or
6-13 more in value" with the phrase "50 percent or more in value or 50
6-14 percent or more of the total combined voting power of all classes
6-15 of stock entitled to vote."
6-16 (e) In determining ownership of real or tangible property
6-17 under Subsection (c) the person shall apply the constructive
6-18 ownership rules in Section 267(c) or 318(a), Internal Revenue Code,
6-19 as amended. In making a determination under this subsection, the
6-20 person shall replace:
6-21 (1) the word "stock" in Section 267(c) or 318(a) with
6-22 the phrase "real or tangible property located in this state"; and
6-23 (2) Section 318(a)(2)(C) with "If 50 percent or more
6-24 in value or 50 percent or more of the total combined voting power
6-25 of all classes of stock entitled to vote is owned directly or
6-26 indirectly by or for any person, the corporation owns the property
7-1 located in this state that is owned directly or indirectly by or
7-2 for the person."
7-3 SECTION 4. Section 151.107(a), Tax Code, is amended to read
7-4 as follows:
7-5 (a) For the purpose of this subchapter and in relation to
7-6 the use tax, a retailer is engaged in business in this state if the
7-7 retailer:
7-8 (1) maintains, occupies, or uses in this state
7-9 permanently, temporarily, directly, or indirectly or through a
7-10 representative as that term is defined by Section 151.012,
7-11 [subsidiary or agent] by whatever name, an office, place of
7-12 distribution, sales or sample room or place, warehouse, storage
7-13 place, or any other place of business;
7-14 (2) has a representative[, agent, salesman, canvasser,
7-15 or solicitor] operating in this state [under the authority of the
7-16 retailer or its subsidiary] for the purpose of selling or
7-17 delivering or the taking of orders for a taxable item;
7-18 (3) derives rentals from a lease of tangible personal
7-19 property situated in this state;
7-20 (4) engages in regular or systematic solicitation of
7-21 sales of taxable items in this state by the distribution of
7-22 catalogs, periodicals, advertising flyers, electronic images, or
7-23 other advertising, by means of print, radio, or television media,
7-24 or by mail, telegraphy, telephone, computer data base, cable,
7-25 optic, microwave, or other communication system for the purpose of
7-26 effecting sales of taxable items and has a physical presence in
8-1 this state as provided by Section 151.012;
8-2 [(5) solicits orders for taxable items by mail or
8-3 through other media and under federal law is subject to or
8-4 permitted to be made subject to the jurisdiction of this state for
8-5 purposes of collecting the taxes imposed by this chapter;]
8-6 (5) [(6)] has a franchisee or licensee operating under
8-7 its trade name if the franchisee or licensee is required to collect
8-8 the tax under this section; or
8-9 (6) [(7)] otherwise does business in this state and
8-10 is, under federal law as interpreted in the year the tax is imposed
8-11 on the retailer, subject to or permitted to be made subject to the
8-12 jurisdiction of this state for purposes of collecting the taxes
8-13 imposed by this chapter.
8-14 SECTION 5. This Act takes effect September 1, 2001.