By: Fraser, Van de Putte S.B. No. 823
(In the Senate - Filed March 3, 2003; March 10, 2003, read
first time and referred to Committee on Finance; May 12, 2003,
reported adversely, with favorable Committee Substitute by the
following vote: Yeas 10, Nays 0; May 12, 2003, sent to printer.)
COMMITTEE SUBSTITUTE FOR S.B. No. 823 By: Zaffirini
A BILL TO BE ENTITLED
AN ACT
relating to administration of the sales and use tax and compliance
with the Streamlined Sales and Use Tax Agreement.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 142.002, Tax Code, is amended by
amending Subdivisions (1), (2), (3), (4), and (6) and adding
Subdivisions (3-a), (3-b), and (3-c) to read as follows:
(1) "Agreement" means the Streamlined Sales and Use
Tax Agreement as amended and adopted on November 12, 2002 [January
27, 2001].
(2) "Certified automated system" means software
certified under [jointly by the states that are signatories to] the
agreement to calculate [compute] the tax imposed by each
jurisdiction on a transaction, determine the amount of tax to remit
to the appropriate state, and maintain a record of the transaction.
(3) "Certified service provider" means an agent
certified under [jointly by the states that are signatories to] the
agreement to perform all of the seller's sales tax functions, other
than the seller's obligation to remit tax on the seller's own
purchases.
(3-a) "Model 1 seller" means a seller that has
selected a certified service provider as the seller's agent to
perform all of the seller's sales and use tax functions, other than
the seller's obligation to remit tax on the seller's own purchases.
(3-b) "Model 2 seller" means a seller that has
selected a certified automated system to perform part of the
seller's sales and use tax functions, but retains responsibility
for remitting the tax.
(3-c) "Model 3 seller" means a seller that has sales in
at least five member states, has total annual sales revenue of at
least $500 million, has a proprietary system that calculates the
amount of tax due each jurisdiction, and has entered into a
performance agreement with the member states that establishes a tax
performance standard for the seller. The term includes an
affiliated group of sellers using the same proprietary system.
(4) "Sales tax" means a sales tax administered or
computed under Chapter 151 [this subtitle or Subtitle C, Title 3, or
in a similar manner].
(6) "Use tax" means a use tax administered or computed
under Chapter 151 [this subtitle or Subtitle C, Title 3, or in a
similar manner].
SECTION 2. Section 142.005, Tax Code, is amended by adding
Subsection (c) to read as follows:
(c) The comptroller may enter into the agreement on behalf
of this state if the governor, lieutenant governor, speaker of the
house of representatives, and comptroller unanimously agree that it
would be in this state's best interest to be a signatory to the
agreement.
SECTION 3. Chapter 142, Tax Code, is amended by adding
Section 142.0055 to read as follows:
Sec. 142.0055. RULES. The comptroller may adopt rules
relating to the administration and collection of the sales and use
tax as necessary to comply with the agreement, including rules
establishing the requirements for a seller to be a Model 1 seller,
Model 2 seller, or Model 3 seller.
SECTION 4. Chapter 142, Tax Code, is amended by adding
Section 142.011 to read as follows:
Sec. 142.011. SETTLEMENT OF TAX, PENALTY, AND INTEREST. On
or after the later of the date on which the agreement takes effect
as provided by the terms of the agreement or this state becomes a
signatory to the agreement, the comptroller may settle a claim for
tax, penalty, or interest on tax imposed by Chapter 151 if necessary
for the comptroller to comply with the terms of the agreement.
SECTION 5. Subchapter A, Chapter 151, Tax Code, is amended
by adding Section 151.012 to read as follows:
Sec. 151.012. EFFECTIVE DATE OF TAX RATE CHANGES. (a) A
change in the rate of the tax imposed under Sections 151.051 and
151.101 must take effect on the first day of a calendar quarter.
(b) If the performance of a taxable service begins before
the effective date of a change in the tax rate and the performance
will not be completed until after that effective date, the change in
the tax rate applies to the first billing period for the service
performed on or after that effective date.
SECTION 6. Section 151.103, Tax Code, is amended by adding
Subsection (d) to read as follows:
(d) A retailer who holds a sales tax permit issued by the
comptroller under this chapter shall collect any applicable local
use tax that is due from a purchaser even if the retailer is not
engaged in business in the local jurisdiction into which the
taxable item is shipped or delivered.
SECTION 7. Subsection (b), Section 151.152, Tax Code, is
amended to read as follows:
(b) A resale certificate must:
(1) be signed by the purchaser or contain an
electronic form of the purchaser's signature authorized by the
comptroller and contain the purchaser's name and address;
(2) state the purchaser's tax permit number or that the
purchaser's application for a tax permit is pending before the
comptroller; and
(3) contain a description of the tangible personal
property sold, leased, or rented by the purchaser in the regular
course of business or transferred as an integral part of a taxable
service performed in the regular course of business.
SECTION 8. Section 151.202, Tax Code, is amended by adding
Subsection (c) to read as follows:
(c) A person desiring to be a seller in this state must agree
to collect any applicable local use tax that may be imposed by a
local jurisdiction even if the seller is not engaged in business in
the local jurisdiction into which the taxable item is shipped or
delivered.
SECTION 9. Section 151.314, Tax Code, is amended by
amending Subsections (c), (e), (f), and (g) and adding Subsections
(c-1), (c-2), and (c-3) to read as follows:
(c) "Food products" shall not include:
(1) drugs, medicines, tonics, vitamins, dietary
supplements, and medicinal preparations in any form;
(2) carbonated and noncarbonated packaged soft
drinks, which are nonalcoholic beverages that contain natural or
artificial sweeteners [and diluted juices and ice and candy];
(3) ice; or
(4) candy [foods and drinks (which include meals, milk
and milk products, fruit and fruit products, sandwiches, salads,
processed meats and seafoods, vegetable juices, ice cream in cones
or small cups) served, prepared, or sold ready for immediate
consumption in or by restaurants, lunch counters, cafeterias,
vending machines, hotels, or like places of business or sold ready
for immediate consumption from pushcarts, motor vehicles, or any
other form of vehicle].
(c-1) For purposes of this section, diluted juice that is
more than 50 percent vegetable or fruit juice by volume is not
considered to be a soft drink.
(c-2) The exemption provided by Subsection (a) does not
include the following prepared food:
(1) food, food products, and drinks, including meals,
milk and milk products, fruit and fruit products, sandwiches,
salads, processed meats and seafoods, vegetable juice, and ice
cream in cones or small cups, served, prepared, or sold ready for
immediate consumption in or by restaurants, lunch counters,
cafeterias, vending machines, hotels, or like places of business or
sold ready for immediate consumption from pushcarts, motor
vehicles, or any other form of vehicle;
(2) food sold in a heated state or heated by the
seller; or
(3) two or more food ingredients mixed or combined by
the seller for sale as a single item, including items that are sold
in an unheated state by weight or volume as a single item, but not
including food that is only cut, repackaged, or pasteurized by the
seller.
(c-3) The exemption provided by Subsection (a) includes:
(1) bakery items sold without plates or other eating
utensils, including bread, rolls, buns, biscuits, bagels,
croissants, pastries, doughnuts, Danish, cakes, tortes, pies,
tarts, muffins, bars, cookies, and tortillas; and
(2) eggs, fish, meat, and poultry, and foods
containing these raw animal foods, that require cooking by the
consumer as recommended by the Food and Drug Administration in
Chapter 3, Section 401.11 of its Food Code to prevent food-borne
illness and any other food that requires cooking by the consumer
before the food is edible.
(e) Food products, candy, and soft drinks [carbonated
beverages, and diluted juices] are exempted from the taxes imposed
by this chapter if sold at an exempt sale qualifying under this
subsection or if stored or used by the purchaser of the item at the
exempt sale. A sale is exempted under this subsection if:
(1) the sale is made by a person under 19 years old who
is a member of a nonprofit organization devoted to the exclusive
purpose of education or religious or physical training or by a group
associated with a public or private elementary or secondary school;
(2) the sale is made as a part of a fund-raising drive
sponsored by the organization or group; and
(3) all net proceeds from the sale go to the
organization or group for its exclusive use.
(f) The exemption provided by this section does
[Subsections (a), (b), and (c) of this section do] not apply to the
sale of food products through the use or operation of a vending
machine for which [edible products for human consumption] the
receipts or sales prices are determined by [price for which are
taxed subject to] Section 151.007(d) [of this code].
(g) The exemption provided by Subsection (d)(3) does not
apply to food products, meals, soft drinks, and candy [for human
consumption] sold to a person confined in a correctional facility
operated under the authority or jurisdiction of or under contract
with this state or a political subdivision of the state.
SECTION 10. Subsection (a), Section 151.317, Tax Code, is
amended to read as follows:
(a) Subject to Subsection (d), gas and electricity are
exempted from the taxes imposed by this chapter when sold for:
(1) residential use;
(2) use in powering equipment exempt under Section
151.318 or 151.3185 by a person processing tangible personal
property for sale as tangible personal property, other than
preparation or storage of prepared food described by Section
151.314(c-2) [food for immediate consumption];
(3) use in lighting, cooling, and heating in the
manufacturing area during the actual manufacturing or processing of
tangible personal property for sale as tangible personal property,
other than preparation or storage of prepared food described by
Section 151.314(c-2) [food for immediate consumption];
(4) use directly in exploring for, producing, or
transporting, a material extracted from the earth;
(5) use in agriculture, including dairy or poultry
operations and pumping for farm or ranch irrigation;
(6) use directly in electrical processes, such as
electroplating, electrolysis, and cathodic protection;
(7) use directly in the off-wing processing, overhaul,
or repair of a jet turbine engine or its parts for a certificated or
licensed carrier of persons or property;
(8) use directly in providing, under contracts with or
on behalf of the United States government or foreign governments,
defense or national security-related electronics, classified
intelligence data processing and handling systems, or
defense-related platform modifications or upgrades;
(9) a direct or indirect use, consumption, or loss of
electricity by an electric utility engaged in the purchase of
electricity for resale; or
(10) use in timber operations, including pumping for
irrigation of timberland.
SECTION 11. Subsection (c), Section 151.317, Tax Code, as
amended by Chapters 631 and 1467, Acts of the 76th Legislature,
Regular Session, 1999, is reenacted to read as follows:
(c) In this section, "residential use" means use:
(1) in a family dwelling or in a multifamily apartment
or housing complex or building or in a part of a building occupied
as a home or residence when the use is by the owner of the dwelling,
apartment, complex, or building or part of the building occupied;
or
(2) in a dwelling, apartment, house, or building or
part of a building occupied as a home or residence when the use is by
a tenant who occupies the dwelling, apartment, house, or building
or part of a building under a contract for an express initial term
for longer than 29 consecutive days.
SECTION 12. Section 321.003, Tax Code, is amended to read as
follows:
Sec. 321.003. OTHER PORTIONS OF TAX APPLICABLE. Subtitles
A and B, Title 2, and Chapters 142 and [Chapter] 151 apply to the
taxes and to the administration and enforcement of the taxes
imposed by this chapter in the same manner that those laws apply to
state taxes, unless modified by this chapter.
SECTION 13. Section 321.203, Tax Code, is amended by
amending Subsections (b), (c), (d), (e), and (g) and adding
Subsections (g-1), (g-2), (g-3), and (l) to read as follows:
(b) If a retailer has only one place of business in this
state, all of the retailer's retail sales of tangible personal
property are consummated at that place of business except as
provided by Subsection (e).
(c) If a retailer has more than one place of business in this
state, a sale of tangible personal property [a taxable item] by the
retailer is consummated at the retailer's place of business:
(1) from which the retailer ships or delivers the
property [item], if the retailer ships or delivers the property
[item] to a point designated by the purchaser or lessee; or
(2) where the purchaser or lessee takes possession of
and removes the property [item], if the purchaser or lessee takes
possession of and removes the property [item] from a place of
business of the retailer.
(d) If neither the possession of tangible personal property
[a taxable item] is taken at nor shipment or delivery of the
property [item] is made from the retailer's place of business in
this state, the sale is consummated at:
(1) the retailer's place of business in this state
where the order is received; or
(2) if the order is not received at a place of business
of the retailer, the place of business from which the retailer's
salesman who took the order operates.
(e) A sale of tangible personal property is consummated at
the location in this state to which the property [a taxable item] is
shipped or delivered or at which possession is taken by the customer
if transfer of possession of the property [a taxable item] occurs
at, or shipment or delivery of the property [item] originates from,
a location in this state other than a place of business of the
retailer and if:
(1) the retailer is an itinerant vendor who has no
place of business;
(2) the retailer's place of business where the
purchase order is initially received or from which the retailer's
salesman who took the order operates is outside this state; or
(3) the purchaser places the order directly with the
retailer's supplier and the property [item] is shipped or delivered
directly to the purchaser by the supplier.
(g) The [sale of telecommunications services is consummated
at the location of the telephone or other telecommunications device
from which the call or other transmission originates, unless the
point of origin cannot be determined, in which case the sale is at
the address to which the call is billed. However, the] sale of
mobile telecommunications services is consummated in accordance
with [the provisions of] Section 151.061.
(g-1) The sale of telecommunications services sold based on
a price that is measured by individual calls is consummated at the
location where the call originates and terminates or the location
where the call either originates or terminates and at which the
service address is also located.
(g-2) Except as provided by Subsection (g-3), the sale of
telecommunications services sold on a basis other than on a
call-by-call basis is consummated at the location of the customer's
place of primary use. In this subsection, "place of primary use"
has the meaning assigned by Section 151.061(a)(2).
(g-3) A sale of post-paid calling services is consummated at
the location of the origination point of the telecommunications
signal as first identified by the seller's telecommunications
system or by information received by the seller from the seller's
service provider if the system used to transport the signal is not
that of the seller.
(l) Except as otherwise provided by this section, the sale
of a taxable service is consummated at the location at which the
service is performed or otherwise delivered.
SECTION 14. Section 323.003, Tax Code, is amended to read as
follows:
Sec. 323.003. OTHER PORTIONS OF TAX APPLICABLE. Subtitles
A and B, Title 2, and Chapters 142 and [Chapter] 151 apply to the
taxes and to the administration and enforcement of the taxes
imposed by this chapter in the same manner that those laws apply to
state taxes unless modified by this chapter.
SECTION 15. Section 323.203, Tax Code, is amended by
amending Subsections (b), (c), (d), (e), and (g) and adding
Subsections (g-1), (g-2), (g-3), and (l) to read as follows:
(b) If a retailer has only one place of business in this
state, all of the retailer's retail sales of tangible personal
property are consummated at that place of business except as
provided by Subsection (e).
(c) If a retailer has more than one place of business in this
state, a sale of tangible personal property [a taxable item] by the
retailer is consummated at the retailer's place of business:
(1) from which the retailer ships or delivers the
property [item], if the retailer ships or delivers the property
[item] to a point designated by the purchaser or lessee; or
(2) where the purchaser or lessee takes possession of
and removes the property [item], if the purchaser or lessee takes
possession of and removes the property [item] from a place of
business of the retailer.
(d) If neither the possession of tangible personal property
[a taxable item] is taken at nor shipment or delivery of the
property [item] is made from the retailer's place of business in
this state, the sale is consummated at:
(1) the retailer's place of business in this state
where the order is received; or
(2) if the order is not received at a place of business
of the retailer, the place of business from which the retailer's
salesman who took the order operates.
(e) A sale of tangible personal property is consummated at
the location in this state to which the property [a taxable item] is
shipped or delivered or at which possession is taken by the customer
if transfer of possession of the property [a taxable item] occurs
at, or shipment or delivery of the property [taxable item]
originates from, a location in this state other than a place of
business of the retailer and if:
(1) the retailer is an itinerant vendor who has no
place of business;
(2) the retailer's place of business where the
purchase order is initially received or from which the retailer's
salesman who took the order operates is outside this state; or
(3) the purchaser places the order directly with the
retailer's supplier and the property [taxable item] is shipped or
delivered directly to the purchaser by the supplier.
(g) The sale of [telecommunications services is consummated
at the location of the telephone or other telecommunications device
from which the call or other transmission originates, unless the
point of origin cannot be determined, in which case the sale is at
the address to which the call is billed. However, the sale of]
mobile telecommunications services is consummated in accordance
with [the provisions of] Section 151.061.
(g-1) The sale of telecommunications services sold based on
a price that is measured by individual calls is consummated at the
location where the call originates and terminates or the location
where the call either originates or terminates and at which the
service address is also located.
(g-2) Except as provided by Subsection (g-3), the sale of
telecommunications services sold on a basis other than on a
call-by-call basis is consummated at the location of the customer's
place of primary use. In this subsection, "place of primary use"
has the meaning assigned by Section 151.061(a)(2).
(g-3) A sale of post-paid calling services is consummated at
the location of the origination point of the telecommunications
signal as first identified by the seller's telecommunications
system or by information received by the seller from the seller's
service provider if the system used to transport the signal is not
that of the seller.
(l) Except as otherwise provided by this section, the sale
of a taxable service is consummated at the location at which the
service is performed or otherwise delivered.
SECTION 16. (a) The comptroller of public accounts shall
conduct a study of the economic and other costs to political
subdivisions of this state of changing the sourcing laws relating
to the sale of tangible personal property to comply with the
Streamlined Sales and Use Tax Agreement.
(b) The comptroller of public accounts may request from a
political subdivision of this state any information the comptroller
requires to complete the study, and the political subdivision shall
provide the requested information as soon as possible.
(c) Not later than December 31, 2004, the comptroller shall
provide to the lieutenant governor, speaker of the house of
representatives, and presiding officers of the senate and house
committees having primary jurisdiction over the comptroller a
report on the results of the study.
SECTION 17. The following provisions of the Tax Code are
repealed:
(1) Subsection (c), Section 151.326; and
(2) Chapter 326.
SECTION 18. (a) Except as provided by Subsection (b) of
this section, this Act takes effect October 1, 2003.
(b) Subsection (d), Section 151.103, and Subsection (c),
Section 151.202, Tax Code, as added by this Act, and Sections
321.203 and 323.203, Tax Code, as amended by this Act, take effect
July 1, 2004.
(c) The change in law made by this Act does not affect taxes
imposed before the effective date of this Act, and the former law is
continued in effect for purposes of the liability for and
collection of those taxes.
* * * * *