By: Ellis S.B. No. 1497 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the sourcing of charges for mobile telecommunications 1-3 services. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Subchapter C, Chapter 151, Tax Code, is amended 1-6 by adding Section 151.061 to read as follows: 1-7 Sec. 151.061. SOURCING OF CHARGES FOR MOBILE 1-8 TELECOMMUNICATIONS SERVICES. (a) In this section: 1-9 (1) "Home service provider" means the facilities-based 1-10 carrier or reseller with which the customer contracts for the 1-11 provision of mobile telecommunications services. 1-12 (2) "Place of primary use" means the street address 1-13 that is representative of where the customer's use of the mobile 1-14 telecommunications service primarily occurs. That location must be 1-15 the residential street address or the primary business street 1-16 address of the customer that is within the licensed service area of 1-17 the home service provider. 1-18 (3) "Electronic database" means a database provided by 1-19 the state or by a designated database provider to home service 1-20 providers. Such electronic database shall, allowing for de minimis 1-21 deviations, designate for each street address in the state, 1-22 including, to the extent practical, any multiple postal street 1-23 addresses applicable to one street location, the appropriate taxing 1-24 jurisdictions, and the appropriate code for each taxing 1-25 jurisdiction, for each level of taxing jurisdiction, identified by 2-1 one nationwide numeric code. The nationwide standard numeric codes 2-2 shall contain the same number of numeric digits, with each digit or 2-3 combination of digits referring to the same level of taxing 2-4 jurisdiction throughout the United States using a format similar to 2-5 FIPS 55-3 or other appropriate standard approved by the Federation 2-6 of Tax Administrators and the Multistate Tax Commission or their 2-7 successors. Each address shall be provided in standard postal 2-8 format. Such electronic database shall also provide the 2-9 appropriate code for each street address with respect to political 2-10 subdivisions which are not taxing jurisdictions when reasonably 2-11 needed to determine the proper taxing jurisdictions. 2-12 (b) This section applies to state and local sales and use 2-13 taxes administered and computed under this title or Title 3 and to 2-14 which this title or Title 3 applies, including this chapter. 2-15 (c) The federal Mobile Telecommunications Sourcing Act (4 2-16 U.S.C. Sections 116-126) governs the sourcing of charges for mobile 2-17 telecommunications services. In accordance with that Act: 2-18 (1) mobile telecommunications services provided in a 2-19 taxing jurisdiction to a customer, the charges for which are billed 2-20 by or for the customer's home service provider, shall be deemed to 2-21 be provided by the customer's home service provider; and 2-22 (2) all charges for mobile telecommunications services 2-23 that are deemed to be provided by the customer's home service 2-24 provider in accordance with this Act are authorized to be subjected 2-25 to tax, charge, or fee by the taxing jurisdictions whose 2-26 territorial limits encompass the customer's place of primary use, 3-1 regardless of where the mobile telecommunications services 3-2 originate, terminate, or pass through, and no other taxing 3-3 jurisdiction may impose taxes, charges, or fees on charges for such 3-4 mobile telecommunications services. 3-5 (d) If a customer believes that an amount of tax or an 3-6 assignment of place of primary use or taxing jurisdiction included 3-7 on a billing is erroneous, the customer shall notify the home 3-8 service provider in writing. The customer shall include in the 3-9 written notification: 3-10 (1) the customer's street address for the customer's 3-11 place of primary use; 3-12 (2) the account name and number for which the customer 3-13 requests the correction; 3-14 (3) a description of the error asserted by the 3-15 customer; and 3-16 (4) any other information that the home service 3-17 provider reasonably requires to process the request. 3-18 (e) Not later than the 60th day after the date the home 3-19 service provider receives a request under Subsection (d), the home 3-20 service provider shall review the provider's records and the 3-21 electronic database or enhanced zip code to determine the correct 3-22 amount of the tax imposed or the assignment of the customer's place 3-23 of primary use or taxing jurisdiction, as appropriate. If the home 3-24 service provider determines that the amount of tax imposed or the 3-25 assignment of place of primary use or taxing jurisdiction is 3-26 incorrect, the home service provider shall correct the error and 4-1 refund or credit any amount of tax erroneously collected from the 4-2 customer. The home service provider shall correct the error and 4-3 refund or credit the amount of tax erroneously collected from the 4-4 customer for a period of up to four years. If the home service 4-5 provider determines that the amount of tax imposed or the 4-6 assignment of place of primary use or taxing jurisdiction is 4-7 correct, the home service provider shall provide a written 4-8 explanation to the customer. 4-9 (f) The procedures prescribed by Subsections (d) and (e) are 4-10 the first course of remedy available to a customer requesting a 4-11 correction of assignment of place of primary use or of taxing 4-12 jurisdiction or a refund of or other compensation for taxes 4-13 erroneously collected by the home service provider. 4-14 (g) The state may provide an electronic database, described 4-15 in Subsection (a)(3), to a home service provider or, if the state 4-16 does not provide such an electronic database to home service 4-17 providers, the designated database provider may provide an 4-18 electronic database to a home service provider. 4-19 (h) The state or the designated database provider that 4-20 provides or maintains an electronic database described in 4-21 Subsection (a)(3) shall provide notice of the availability of the 4-22 then current electronic database, and any subsequent revisions 4-23 thereof, by publication in the manner normally employed by the 4-24 state. 4-25 (i) A home service provider using the data contained in an 4-26 electronic database described in Subsection (a)(3) shall be held 5-1 harmless from any tax, charge, or fee liability that otherwise 5-2 would be due solely as a result of any error or omission in such 5-3 database provided by the state or designated database provider. 5-4 The home service provider shall reflect changes made to such 5-5 database during a calendar quarter not later than 30 days after the 5-6 end of such calendar quarter. 5-7 (j) If neither the state nor the designated database 5-8 provider provides an electronic database as described in Subsection 5-9 (a)(3), a home service provider shall be held harmless from any 5-10 tax, charge, or fee liability in the state that otherwise would be 5-11 due solely as a result of an assignment of a street address to an 5-12 incorrect taxing jurisdiction if, subject to Subsection (n), the 5-13 home service provider employs an enhanced zip code to assign each 5-14 street address to a specific taxing jurisdiction for each level of 5-15 taxing jurisdiction and exercises due diligence at each level of 5-16 taxing jurisdiction to ensure that each such street address is 5-17 assigned to the correct taxing jurisdiction. If an enhanced zip 5-18 code overlaps boundaries of taxing jurisdictions of the same level, 5-19 the home service provider must designate one specific jurisdiction 5-20 within such enhanced zip code for use in taxing the activity for 5-21 such enhanced zip code for each level of taxing jurisdiction. Any 5-22 enhanced zip code assignment changed in accordance with Subsection 5-23 (n) is deemed to be in compliance with this section. For purposes 5-24 of this section, there is a rebuttable presumption that a home 5-25 service provider has exercised due diligence if such home service 5-26 provider demonstrates that it has: 6-1 (1) expended reasonable resources to implement and 6-2 maintain an appropriately detailed electronic database of street 6-3 address assignments to taxing jurisdictions; 6-4 (2) implemented and maintained reasonable internal 6-5 controls to promptly correct misassignments of street addresses to 6-6 taxing jurisdictions; and 6-7 (3) used all reasonably obtainable and usable data 6-8 pertaining to municipal annexations, incorporations, 6-9 reorganizations, and any other changes in jurisdictional boundaries 6-10 that materially affect the accuracy of such database. 6-11 (k) Subsection (j) applies to a home service provider that 6-12 is in compliance with the requirements of Subsection (j), if an 6-13 electronic database as defined in Subsection (a)(3) is not provided 6-14 until the later of: 6-15 (1) 18 months after the nationwide standard numeric 6-16 code described in Subsection (a)(3) has been approved by the 6-17 Federation of Tax Administrators and the Multistate Tax Commission; 6-18 or 6-19 (2) 6 months after the state or a designated database 6-20 provider in the state provides such database as prescribed in 6-21 Subsection (a)(3). 6-22 (l) A home service provider shall be responsible for 6-23 obtaining and maintaining the customer's place of primary use as 6-24 defined in Subsection (a)(2). Subject to Subsection (n), and if 6-25 the home service provider's reliance on information provided by its 6-26 customer is in good faith, a taxing jurisdiction shall: 7-1 (1) allow a home service provider to rely on the 7-2 applicable residential or business street address supplied by the 7-3 home service provider's customer; and 7-4 (2) not hold a home service provider liable for any 7-5 additional taxes, charges, or fees based on a different 7-6 determination of the place of primary use for taxes, charges, or 7-7 fees that are customarily passed on to the customer as a separate 7-8 itemized charge. 7-9 (m) Except as provided in Subsection (n), a taxing 7-10 jurisdiction shall allow a home service provider to treat the 7-11 address used by the home service provider for tax purposes for any 7-12 customer under a service contract or agreement in effect two years 7-13 after the date of the enactment of the Mobile Telecommunications 7-14 Sourcing Act (4 U.S.C. Sections 116-126) as that customer's place 7-15 of primary use for the remaining term of such service contract or 7-16 agreement, excluding any extension or renewal of such service 7-17 contract or agreement, for purposes of determining the taxing 7-18 jurisdictions to which taxes, charges, or fees on charges for 7-19 mobile telecommunications services are remitted. 7-20 (n) The state may: 7-21 (1) determine that the address used for purposes of 7-22 determining the taxing jurisdictions to which taxes, charges, or 7-23 fees for mobile telecommunications services are remitted does not 7-24 meet the definition of place of primary use under Subsection (a)(2) 7-25 and give binding notice to the home service provider to change the 7-26 place of primary use on a prospective basis from the date of notice 8-1 of determination. Before the state gives such notice of 8-2 determination, the customer shall be given an opportunity to 8-3 demonstrate in accordance with applicable state administrative 8-4 procedures that the address is the customer's place of primary use; 8-5 and 8-6 (2) determine that the assignment of a taxing 8-7 jurisdiction by a home service provider under Subsection (j) does 8-8 not reflect the correct taxing jurisdiction and give binding notice 8-9 to the home service provider to change the assignment on a 8-10 prospective basis from the date of notice of determination. The 8-11 home service provider shall be given an opportunity to demonstrate 8-12 in accordance with applicable state administrative procedures that 8-13 the assignment reflects the correct taxing jurisdiction. 8-14 (o)(1) If a taxing jurisdiction does not otherwise subject 8-15 charges for mobile telecommunications services to taxation and if 8-16 these charges are aggregated with and not separately stated from 8-17 charges that are subject to taxation, then the charges for 8-18 nontaxable mobile telecommunications services may be subject to 8-19 taxation unless the home service provider can reasonably identify 8-20 charges not subject to such tax, charge, or fee from its books and 8-21 records that are kept in the regular course of business. 8-22 (2) If a taxing jurisdiction does not subject charges 8-23 for mobile telecommunications services to taxation, a customer may 8-24 not rely upon the nontaxability of charges for mobile 8-25 telecommunications services unless the customer's home service 8-26 provider separately states the charges for nontaxable mobile 9-1 telecommunications services from taxable charges or the home 9-2 service provider elects, after receiving a written request from the 9-3 customer in the form required by the provider, to provide 9-4 verifiable data based upon the home service provider's books and 9-5 records that are kept in the regular course of business that 9-6 reasonably identifies the nontaxable charges. 9-7 SECTION 2. Subsection (g), Section 321.203, Tax Code, is 9-8 amended to read as follows: 9-9 (g) The sale of telecommunications services is consummated 9-10 at the location of the telephone or other telecommunications device 9-11 from which the call or other transmission originates, unless the 9-12 point of origin cannot be determined, in which case the sale is at 9-13 the address to which the call is billed. However, the sale of 9-14 mobile telecommunications services is consummated in accordance 9-15 with the provisions of Section 151.061. 9-16 SECTION 3. Subsection (g), Section 323.203, Tax Code, is 9-17 amended to read as follows: 9-18 (g) The sale of telecommunications services is consummated 9-19 at the location of the telephone or other telecommunications device 9-20 from which the call or other transmission originates, unless the 9-21 point of origin cannot be determined, in which case the sale is at 9-22 the address to which the call is billed. However, the sale of 9-23 mobile telecommunications services is consummated in accordance 9-24 with the provisions of Section 151.061. 9-25 SECTION 4. Subchapter D, Chapter 771, Health and Safety 9-26 Code, is amended by adding Section 771.0735 to read as follows: 10-1 Sec. 771.0735. SOURCING OF CHARGES FOR MOBILE 10-2 TELECOMMUNICATIONS SERVICES. The federal Mobile Telecommunications 10-3 Sourcing Act (4 U.S.C. Sections 116-126) governs the sourcing of 10-4 charges for mobile telecommunications services. In accordance with 10-5 that Act: 10-6 (1) mobile telecommunications services provided in a 10-7 taxing jurisdiction to a customer, the charges for which are billed 10-8 by or for the customer's home service provider, shall be deemed to 10-9 be provided by the customer's home service provider; 10-10 (2) all charges for mobile telecommunications services 10-11 that are deemed to be provided by the customer's home service 10-12 provider in accordance with the Act are authorized to be subjected 10-13 to tax, charge, or fee by the taxing jurisdictions whose 10-14 territorial limits encompass the customer's place of primary use, 10-15 regardless of where the mobile telecommunications services 10-16 originate, terminate, or pass through, and no other taxing 10-17 jurisdiction may impose taxes, charges, or fees on charges for such 10-18 mobile telecommunications services; and 10-19 (3) the fee imposed on wireless telecommunications 10-20 bills shall be administered in accordance with Section 151.061, Tax 10-21 Code. 10-22 SECTION 5. This Act takes effect August 1, 2002, provided 10-23 that the amendments made by this Act with respect to tax 10-24 liabilities shall apply only to revenues from customer bills issued 10-25 on or after August 1, 2002. A tax assessed or charge, fee, or 10-26 assessment imposed before August 1, 2002, is governed by the law in 11-1 effect on the date the tax was assessed or the charge, fee, or 11-2 assessment was imposed, and that law is continued in effect for 11-3 that purpose.