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. 4-68 * * * * *