1-1     By:  Ellis                                            S.B. No. 1497
 1-2           (In the Senate - Filed March 9, 2001; March 13, 2001, read
 1-3     first time and referred to Committee on Finance; April 17, 2001,
 1-4     reported adversely, with favorable Committee Substitute by the
 1-5     following vote:  Yeas 11, Nays 0; April 17, 2001, sent to printer.)
 1-6     COMMITTEE SUBSTITUTE FOR S.B. No. 1497                   By:  Ellis
 1-7                            A BILL TO BE ENTITLED
 1-8                                   AN ACT
 1-9     relating to the sourcing of charges for mobile telecommunications
1-10     services.
1-11           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12           SECTION 1.  Subchapter C, Chapter 151, Tax Code, is amended
1-13     by adding Section 151.061 to read as follows:
1-14           Sec. 151.061.  SOURCING OF CHARGES FOR MOBILE
1-15     TELECOMMUNICATIONS SERVICES.  (a)  In this section:
1-16                 (1)  "Home service provider" means the facilities-based
1-17     carrier or reseller with which the customer contracts for the
1-18     provision of mobile telecommunications services.
1-19                 (2)  "Place of primary use" means the street address
1-20     that is representative of where the customer's use of the mobile
1-21     telecommunications service primarily occurs.  That location must be
1-22     the residential street address or the primary business street
1-23     address of the customer that is within the licensed service area of
1-24     the home service provider.
1-25                 (3)  "Electronic database" means a database provided by
1-26     the state or by a designated database provider to home service
1-27     providers.  Such electronic database shall, allowing for de minimis
1-28     deviations, designate for each street address in the state,
1-29     including, to the extent practical, any multiple postal street
1-30     addresses applicable to one street location, the appropriate taxing
1-31     jurisdictions, and the appropriate code for each taxing
1-32     jurisdiction, for each level of taxing jurisdiction, identified by
1-33     one nationwide numeric code.  The nationwide standard numeric codes
1-34     shall contain the same number of numeric digits, with each digit or
1-35     combination of digits referring to the same level of taxing
1-36     jurisdiction throughout the United States using a format similar to
1-37     FIPS 55-3 or other appropriate standard approved by the Federation
1-38     of Tax Administrators and the Multistate Tax Commission or their
1-39     successors.  Each address shall be provided in standard postal
1-40     format.  Such electronic database shall also provide the
1-41     appropriate code for each street address with respect to political
1-42     subdivisions which are not taxing jurisdictions when reasonably
1-43     needed to determine the proper taxing jurisdictions.
1-44           (b)  This section applies to state and local sales and use
1-45     taxes administered and computed under this title or Title 3 and to
1-46     which this title or Title 3 applies, including this chapter.
1-47           (c)  The federal Mobile Telecommunications Sourcing Act (4
1-48     U.S.C. Sections 116-126) governs the sourcing of charges for mobile
1-49     telecommunications services.  In accordance with that Act:
1-50                 (1)  mobile telecommunications services provided in a
1-51     taxing jurisdiction to a customer, the charges for which are billed
1-52     by or for the customer's home service provider, shall be deemed to
1-53     be provided by the customer's home service provider; and
1-54                 (2)  all charges for mobile telecommunications services
1-55     that are deemed to be provided by the customer's home service
1-56     provider in accordance with this Act are authorized to be subjected
1-57     to tax, charge, or fee by the taxing jurisdictions whose
1-58     territorial limits encompass the customer's place of primary use,
1-59     regardless of where the mobile telecommunications services
1-60     originate, terminate, or pass through, and no other taxing
1-61     jurisdiction may impose taxes, charges, or fees on charges for such
1-62     mobile telecommunications services.
1-63           (d)  If a customer believes that an amount of tax or an
1-64     assignment of place of primary use or taxing jurisdiction included
 2-1     on a billing is erroneous, the customer shall notify the home
 2-2     service provider in writing.  The customer shall include in the
 2-3     written notification:
 2-4                 (1)  the customer's street address for the customer's
 2-5     place of primary use;
 2-6                 (2)  the account name and number for which the customer
 2-7     requests the correction;
 2-8                 (3)  a description of the error asserted by the
 2-9     customer; and
2-10                 (4)  any other information that the home service
2-11     provider reasonably requires to process the request.
2-12           (e)  Not later than the 60th day after the date the home
2-13     service provider receives a request under Subsection (d), the home
2-14     service provider shall review the provider's records and the
2-15     electronic database or enhanced zip code to determine the correct
2-16     amount of the tax imposed or the assignment of the customer's place
2-17     of primary use or taxing jurisdiction, as appropriate.  If the home
2-18     service provider determines that the amount of tax imposed or the
2-19     assignment of place of primary use or taxing jurisdiction is
2-20     incorrect, the home service provider shall correct the error and
2-21     refund or credit any amount of tax erroneously collected from the
2-22     customer.  The home service provider shall correct the error and
2-23     refund or credit the amount of tax erroneously collected from the
2-24     customer for a period of up to four years.  If the home service
2-25     provider determines that the amount of tax imposed or the
2-26     assignment of place of primary use or taxing jurisdiction is
2-27     correct, the home service provider shall provide a written
2-28     explanation to the customer.
2-29           (f)  The procedures prescribed by Subsections (d) and (e) are
2-30     the first course of remedy available to a customer requesting a
2-31     correction of assignment of place of primary use or of taxing
2-32     jurisdiction or a refund of or other compensation for taxes
2-33     erroneously collected by the home service provider.
2-34           (g)  The state may provide an electronic database, described
2-35     in Subsection (a)(3), to a home service provider or, if the state
2-36     does not provide such an electronic database to home service
2-37     providers, the designated database provider may provide an
2-38     electronic database to a home service provider.
2-39           (h)  The state or the designated database provider that
2-40     provides or maintains an electronic database described in
2-41     Subsection (a)(3) shall provide notice of the availability of the
2-42     then current electronic database, and any subsequent revisions
2-43     thereof, by publication in the manner normally employed by the
2-44     state.
2-45           (i)  A home service provider using the data contained in an
2-46     electronic database described in Subsection (a)(3) shall be held
2-47     harmless from any tax, charge, or fee liability that otherwise
2-48     would be due solely as a result of any error or omission in such
2-49     database provided by the state or designated database provider.
2-50     The home service provider shall reflect changes made to such
2-51     database during a calendar quarter not later than 30 days after the
2-52     end of such calendar quarter.
2-53           (j)  If neither the state nor the designated database
2-54     provider provides an electronic database as described in Subsection
2-55     (a)(3), a home service provider shall be held harmless from any
2-56     tax, charge, or fee liability in the state that otherwise would be
2-57     due solely as a result of an assignment of a street address to an
2-58     incorrect taxing jurisdiction if, subject to Subsection (n), the
2-59     home service provider employs an enhanced zip code to assign each
2-60     street address to a specific taxing jurisdiction for each level of
2-61     taxing jurisdiction and exercises due diligence at each level of
2-62     taxing jurisdiction to ensure that each such street address is
2-63     assigned to the correct taxing jurisdiction.  If an enhanced zip
2-64     code overlaps boundaries of taxing jurisdictions of the same level,
2-65     the home service provider must designate one specific jurisdiction
2-66     within such enhanced zip code for use in taxing the activity for
2-67     such enhanced zip code for each level of taxing jurisdiction.  Any
2-68     enhanced zip code assignment changed in accordance with Subsection
2-69     (n) is deemed to be in compliance with this section.  For purposes
 3-1     of this section, there is a rebuttable presumption that a home
 3-2     service provider has exercised due diligence if such home service
 3-3     provider demonstrates that it has:
 3-4                 (1)  expended reasonable resources to implement and
 3-5     maintain an appropriately detailed electronic database of street
 3-6     address assignments to taxing jurisdictions;
 3-7                 (2)  implemented and maintained reasonable internal
 3-8     controls to promptly correct misassignments of street addresses to
 3-9     taxing jurisdictions; and
3-10                 (3)  used all reasonably obtainable and usable data
3-11     pertaining to municipal annexations, incorporations,
3-12     reorganizations, and any other changes in jurisdictional boundaries
3-13     that materially affect the accuracy of such database.
3-14           (k)  Subsection (j) applies to a home service provider that
3-15     is in compliance with the requirements of Subsection (j), if an
3-16     electronic database as defined in Subsection (a)(3) is not provided
3-17     until the later of:
3-18                 (1)  18 months after the nationwide standard numeric
3-19     code described in Subsection (a)(3) has been approved by the
3-20     Federation of Tax Administrators and the Multistate Tax Commission;
3-21     or
3-22                 (2)  6 months after the state or a designated database
3-23     provider in the state provides such database as prescribed in
3-24     Subsection (a)(3).
3-25           (l)  A home service provider shall be responsible for
3-26     obtaining and maintaining the customer's place of primary use as
3-27     defined in Subsection (a)(2).  Subject to Subsection (n), and if
3-28     the home service provider's reliance on information provided by its
3-29     customer is in good faith, a taxing jurisdiction shall:
3-30                 (1)  allow a home service provider to rely on the
3-31     applicable residential or business street address supplied by the
3-32     home service provider's customer; and
3-33                 (2)  not hold a home service provider liable for any
3-34     additional taxes, charges, or fees based on a different
3-35     determination of the place of primary use for taxes, charges, or
3-36     fees that are customarily passed on to the customer as a separate
3-37     itemized charge.
3-38           (m)  Except as provided in Subsection (n), a taxing
3-39     jurisdiction shall allow a home service provider to treat the
3-40     address used by the home service provider for tax purposes for any
3-41     customer under a service contract or agreement in effect two years
3-42     after the date of the enactment of the Mobile Telecommunications
3-43     Sourcing Act (4 U.S.C. Sections 116-126) as that customer's place
3-44     of primary use for the remaining term of such service contract or
3-45     agreement, excluding any extension or renewal of such service
3-46     contract or agreement, for purposes of determining the taxing
3-47     jurisdictions to which taxes, charges, or fees on charges for
3-48     mobile telecommunications services are remitted.
3-49           (n)  The state may:
3-50                 (1)  determine that the address used for purposes of
3-51     determining the taxing jurisdictions to which taxes, charges, or
3-52     fees for mobile telecommunications services are remitted does not
3-53     meet the definition of place of primary use under Subsection (a)(2)
3-54     and give binding notice to the home service provider to change the
3-55     place of primary use on a prospective basis from the date of notice
3-56     of determination.  Before the state gives such notice of
3-57     determination, the customer shall be given an opportunity to
3-58     demonstrate in accordance with applicable state administrative
3-59     procedures that the address is the customer's place of primary use;
3-60     and
3-61                 (2)  determine that the assignment of a taxing
3-62     jurisdiction by a home service provider under Subsection (j) does
3-63     not reflect the correct taxing jurisdiction and give binding notice
3-64     to the home service provider to change the assignment on a
3-65     prospective basis from the date of notice of determination.  The
3-66     home service provider shall be given an opportunity to demonstrate
3-67     in accordance with applicable state administrative procedures that
3-68     the assignment reflects the correct taxing jurisdiction.
3-69           (o)(1)  If a taxing jurisdiction does not otherwise subject
 4-1     charges for mobile telecommunications services to taxation and if
 4-2     these charges are aggregated with and not separately stated from
 4-3     charges that are subject to taxation, then the charges for
 4-4     nontaxable mobile telecommunications services may be subject to
 4-5     taxation unless the home service provider can reasonably identify
 4-6     charges not subject to such tax, charge, or fee from its books and
 4-7     records that are kept in the regular course of business.
 4-8                 (2)  If a taxing jurisdiction does not subject charges
 4-9     for mobile telecommunications services to taxation, a customer may
4-10     not rely upon the nontaxability of charges for mobile
4-11     telecommunications services unless the customer's home service
4-12     provider separately states the charges for nontaxable mobile
4-13     telecommunications services from taxable charges or the home
4-14     service provider elects, after receiving a written request from the
4-15     customer in the form required by the provider, to provide
4-16     verifiable data based upon the home service provider's books and
4-17     records that are kept in the regular course of business that
4-18     reasonably identifies the nontaxable charges.
4-19           SECTION 2.  Subsection (g), Section 321.203, Tax Code, is
4-20     amended to read as follows:
4-21           (g)  The sale of telecommunications services is consummated
4-22     at the location of the telephone or other telecommunications device
4-23     from which the call or other transmission originates, unless the
4-24     point of origin cannot be determined, in which case the sale is at
4-25     the address to which the call is billed.  However, the sale of
4-26     mobile telecommunications services is consummated in accordance
4-27     with the provisions of Section 151.061.
4-28           SECTION 3. Subsection (g), Section 323.203, Tax Code, is
4-29     amended to read as follows:
4-30           (g)  The sale of telecommunications services is consummated
4-31     at the location of the telephone or other telecommunications device
4-32     from which the call or other transmission originates, unless the
4-33     point of origin cannot be determined, in which case the sale is at
4-34     the address to which the call is billed.  However, the sale of
4-35     mobile telecommunications services is consummated in accordance
4-36     with the provisions of Section 151.061.
4-37           SECTION 4.  Subchapter D, Chapter 771, Health and Safety
4-38     Code, is amended by adding Section 771.0735 to read as follows:
4-39           Sec. 771.0735.  SOURCING OF CHARGES FOR MOBILE
4-40     TELECOMMUNICATIONS SERVICES.  The federal Mobile Telecommunications
4-41     Sourcing Act (4 U.S.C. Sections 116-126) governs the sourcing of
4-42     charges for mobile telecommunications services.  In accordance with
4-43     that Act:
4-44                 (1)  mobile telecommunications services provided in a
4-45     taxing jurisdiction to a customer, the charges for which are billed
4-46     by or for the customer's home service provider, shall be deemed to
4-47     be provided by the customer's home service provider;
4-48                 (2)  all charges for mobile telecommunications services
4-49     that are deemed to be provided by the customer's home service
4-50     provider in accordance with the Act are authorized to be subjected
4-51     to tax, charge, or fee by the taxing jurisdictions whose
4-52     territorial limits encompass the customer's place of primary use,
4-53     regardless of where the mobile telecommunications services
4-54     originate, terminate, or pass through, and no other taxing
4-55     jurisdiction may impose taxes, charges, or fees on charges for such
4-56     mobile telecommunications services; and
4-57                 (3)  the fee imposed on wireless telecommunications
4-58     bills shall be administered in accordance with Section 151.061, Tax
4-59     Code.
4-60           SECTION 5.  This Act takes effect August 1, 2002, provided
4-61     that the amendments made by this Act with respect to tax
4-62     liabilities shall apply only to revenues from customer bills issued
4-63     on or after August 1, 2002.  A tax assessed or charge, fee, or
4-64     assessment imposed before August 1, 2002, is governed by the law in
4-65     effect on the date the tax was assessed or the charge, fee, or
4-66     assessment was imposed, and that law is continued in effect for
4-67     that purpose.
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