85R8165 BEF-F

By: Uresti S.B. No. 1713

A BILL TO BE ENTITLED

AN ACT

relating to the administration and collection of the state use tax as applied to certain persons engaged in business in this state; requiring a permit; creating an offense.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 151.008(b), Tax Code, is amended to read as follows:

(b) "Seller" and "retailer" include:

(1) a person in the business of making sales at auction of tangible personal property owned by the person or by another;

(2) a person who makes more than two sales of taxable items during a 12-month period, including sales made in the capacity of an assignee for the benefit of creditors or receiver or trustee in bankruptcy;

(3) a person regarded by the comptroller as a seller or retailer under Section 151.024;

(4) a hotel, motel, or owner or lessor of an office or residential building or development that contracts and pays for telecommunications services for resale to guests or tenants;

(5) a person who engages in regular or systematic solicitation of sales of taxable items in this state by the distribution of catalogs, periodicals, advertising flyers, or other advertising, by means of print, radio, or television media, or by mail, telegraphy, telephone, computer data base, cable, optic, microwave, or other communication system for the purpose of effecting sales of taxable items; [and]

(6) a person who, under an agreement with another person, is:

(A) entrusted with possession of tangible personal property with respect to which the other person has title or another ownership interest; and

(B) authorized to sell, lease, or rent the property without additional action by the person having title to or another ownership interest in the property;

(7) a person who is a marketplace provider as defined by Section 151.109; and

(8) a person who is a referrer as defined by Section 151.110.

SECTION 2. Subchapter D, Chapter 151, Tax Code, is amended by adding Section 151.1065 to read as follows:

Sec. 151.1065. REFERRER'S PERMIT REQUIRED. (a) This section applies only to a referrer as defined by Section 151.110 who received:

(1) at least $10,000 in fees, commissions, or other consideration from other retailers for services described by Section 151.110(a) performed by the referrer in this state in the year preceding the year in which an application under this section is due; or

(2) at least $7,500 in fees, commissions, or other consideration from other retailers for services described by Section 151.110(a) performed by the referrer in this state in the first three calendar quarters of the year in which an application under this section is due.

(b) A referrer may not engage in activity described by Section 151.110(a) in this state without a permit issued as provided by this section.

(c) Not later than December 1 of each year, a referrer shall apply to the comptroller for a referrer's permit.

(d) The comptroller shall issue a referrer's permit to an applicant not later than the 15th day after the date the comptroller receives the application for the permit. The permit is valid for the 12-month period beginning on January 1 of the year following the year in which the permit is issued.

(e) The comptroller may not charge, or require security from, a referrer for a referrer's permit.

(f) A referrer's permit is valid only for the referrer to which it is issued and may not be assigned.

(g) The comptroller shall revoke a referrer's permit if the referrer fails to file the report or provide the notice required under Section 151.111.

(h) The comptroller may adopt rules necessary to implement and administer this section.

SECTION 3. Section 151.107, Tax Code, is amended by adding Subsections (c-1), (c-2), (c-3), (c-4), and (c-5) to read as follows:

(c-1) For purposes of this subchapter and in relation to the use tax, a retailer is a retailer engaged in business in this state if the retailer engages in any part of a sale, lease, or rental of a taxable item to a purchaser in this state, regardless of whether the retailer contracts with a third party to perform all or any part of the transaction, or whether the retailer performs all or any part of the transaction through an entity in which the retailer holds a substantial ownership interest or that holds a substantial ownership interest in the retailer. For purposes of this subsection, the sale, lease, or rental of an item includes listing the item for sale, lease, or rent, soliciting an order for the item, branding the item, processing or fulfilling the order for the item, providing customer service relating to the item, and accepting or assisting with the return or exchange of the item. The act of shipping an item by common carrier to a purchaser in this state is not considered engaging in the sale, lease, or rental of a taxable item for purposes of this subsection.

(c-2) For purposes of this subchapter and in relation to the use tax, a retailer is a retailer engaged in business in this state if, to facilitate the sale, lease, or rental of a taxable item to a purchaser in this state, the retailer directly or through a third party uses:

(1) direct response marketing;

(2) a referrer with a significant economic presence in this state; or

(3) another person who has a significant economic presence in this state and with whom the retailer enters into an agreement for the person to refer potential purchasers to the retailer, regardless of whether the referral is not related to a sale, lease, or rental of tangible personal property but subsequently results in a sale, lease, or rental of that property.

(c-3) An agreement described by Subsection (c-2)(3) does not include an agreement under which a retailer purchases advertisements from a person in this state to be delivered by television or radio, in print, on the Internet, or through another means, unless the agreement includes the payment of advertising revenue to the person based wholly or partly on the sales resulting from the advertising.

(c-4) Subsection (c-2) does not apply to a retailer described by that subsection if each person with whom the retailer has entered into an agreement to refer potential purchasers to the retailer:

(1) does not have a significant economic presence in this state; and

(2) certifies to the retailer annually that the person meets the requirement of Subdivision (1).

(c-5) The comptroller shall prescribe the form of the certification described by Subsection (c-4). A person who intentionally or negligently provides false information in the certification commits an offense punishable in the same manner as an offense under Section 151.708.

SECTION 4. Section 151.107(d), Tax Code, is amended by amending Subdivision (1) and adding Subdivisions (1-a) and (1-b) to read as follows:

(1) "Direct response marketing" means, for the purpose of facilitating the sale, lease, or rental of tangible personal property of a retailer to a purchaser in this state, any of the following activities:

(A) transmitting or broadcasting flyers, newsletters, telephone calls, targeted electronic mail, text messages, social media messages, or targeted mailings;

(B) collecting, analyzing, and using individual data on purchasers or potential purchasers in this state;

(C) using information or software, including cached files, cached software, or cookies or other data tracking tools, that is stored on property in this state or that is distributed within this state; or

(D) conducting any other actions that use persons, tangible or intangible property, digital files or information, or software in this state in an effort to enhance the probability that a person's contacts with a purchaser in this state will result in a sale, lease, or rental to that purchaser.

(1-a) "Ownership" includes:

(A) direct ownership;

(B) common ownership; and

(C) indirect ownership through a parent entity, subsidiary, or affiliate.

(1-b) "Referrer" has the meaning assigned by Section 151.110.

SECTION 5. Subchapter D, Chapter 151, Tax Code, is amended by adding Sections 151.1075, 151.109, 151.110, and 151.111 to read as follows:

Sec. 151.1075. RETAILER PRESUMED TO BE ENGAGED IN BUSINESS IN THIS STATE. (a) For purposes of this subchapter and in relation to the use tax, a retailer is presumed to be engaged in business in this state if, in the previous calendar year or the current calendar year, the retailer:

(1) has total receipts of more than $1 million from taxable items delivered in this state, including taxable items delivered electronically to purchasers in this state; or

(2) has at least 2,000 sales of taxable items delivered in this state, including taxable items delivered electronically to purchasers in this state.

(b) A retailer described by Subsection (a) is required to comply with the requirements of this chapter unless the retailer rebuts the presumption under that subsection by proving that it does not have substantial economic nexus with this state.

(c) For purposes of this subchapter and in relation to the use tax, a retailer is presumed to be engaged in business in this state if the retailer is related, as provided by Subsection (d), to a person engaged in business in this state who:

(1) sells under the same or a similar business name taxable items similar to those sold by the retailer;

(2) maintains an office, distribution facility, salesroom, warehouse, storage place, or other similar place of business in this state to facilitate the delivery of taxable items sold by the retailer to purchasers in this state;

(3) uses in this state, with the retailer's knowledge or consent, trademarks, service marks, or trade names that are the same or substantially similar to those used by the retailer;

(4) delivers, installs, assembles, or performs maintenance or repair services in this state on tangible personal property sold by the retailer to purchasers in this state;

(5) facilitates the delivery of tangible personal property to the retailer's customers in this state by allowing the customers to pick up tangible personal property sold by the retailer at an office, distribution facility, salesroom, warehouse, storage place, or other similar place of business maintained by the person in this state; or

(6) shares management, business systems, business practices, or employees with the retailer or engages in intercompany transactions with the retailer related to the activities that establish or maintain the retailer's market in this state.

(d) For purposes of Subsection (c), a retailer is related to a person engaged in business in this state if the retailer and the person:

(1) have a relationship described by Section 267(b) or 707(b)(1), Internal Revenue Code of 1986; or

(2) have an ownership relationship designed with a principal purpose of avoiding the application of Subsection (c).

(e) A retailer may rebut the presumption under Subsection (c) for a reporting period by proving by a preponderance of evidence that the person engaged in business in this state did not engage in any activities on the retailer's behalf during the reporting period sufficient to establish the retailer's substantial economic nexus with this state.

Sec. 151.109. MARKETPLACE PROVIDERS. (a) In this section, "marketplace provider" means a person who:

(1) facilitates the sale, lease, or rental of the tangible personal property of a retailer that is not the person to a purchaser in this state in any manner, including by the use of a catalog or an Internet website;

(2) directly or indirectly collects from a purchaser in this state receipts derived from the sale, lease, or rental of the retailer's tangible personal property to the purchaser and transmits those receipts to the retailer, other than any amount the person is authorized to retain as a fee for facilitating the sale, lease, or rental; and

(3) is engaged in business in this state by means of any of the activities listed in Section 151.107(a), (c-1), or (c-2) or because of an unrebutted presumption under Section 151.1075(a).

(b) A marketplace provider's facilitation of a sale, lease, or rental described by Subsection (a)(1) that results in a sale, lease, or rental by the other retailer is considered the making of a sale by the marketplace provider for purposes of Sections 151.008(a) and 151.103. Notwithstanding Section 151.103, the marketplace provider is not required to collect a use tax imposed under this subchapter that is due from a purchaser if the retailer for whom the marketplace provider facilitates the sale, lease, or rental collects the tax from the purchaser.

(c) For purposes of Subsection (b), a marketplace provider may presume that a retailer registered with the comptroller under Section 151.106 collects the use tax from a purchaser.

(d) Subject to Subsection (e), a marketplace provider is not subject to liability under Subchapter L for failing to collect or remit the appropriate amount of use tax if, in determining the amount, the marketplace provider relies exclusively on information provided by the retailer for whom the marketplace provider facilitates the sale, lease, or rental of the tangible personal property on which the tax is due.

(e) Subsection (d) does not apply if:

(1) the marketplace provider and the retailer for whom the marketplace provider facilitated the sale, lease, or rental of tangible personal property have an ownership relationship designed with a principal purpose of relieving the marketplace provider of liability as authorized by Subsection (d); or

(2) the marketplace provider and the other retailer have a relationship described by Section 267(b) or 707(b)(1), Internal Revenue Code of 1986.

(f) Nothing in this section may be construed as affecting the ability of a marketplace provider and another retailer to enter into an agreement regarding the requirements of this chapter.

(g) The comptroller may adopt rules necessary to implement and administer this section, including rules establishing the requirements for an entity to be considered a marketplace provider.

Sec. 151.110. REFERRERS. (a) In this section, "referrer" means a person who:

(1) for the purpose of facilitating the sale, lease, or rental of tangible personal property of a retailer that is not the person to a purchaser in this state, agrees to list items of tangible personal property and the prices of the items in any forum, including in a catalogue or on an Internet website;

(2) receives a fee, commission, or other consideration as part of the agreement with the retailer;

(3) transfers the purchaser to the retailer or the retailer's Internet website by telephone, electronic link, or any other means to complete a sale, lease, or rental of a listed item; and

(4) does not collect from the purchaser receipts derived from the sale of the item to the purchaser.

(b) For purposes of this subchapter and in relation to the use tax, a referrer who makes a referral to another retailer that results in a sale, lease, or rental of the other retailer's tangible personal property to a purchaser in this state is a retailer engaged in business in this state.

(c) A referrer's facilitation of a sale, lease, or rental described by Subsection (a)(1) that results in a sale, lease, or rental by the other retailer is considered the making of a sale by the referrer for purposes of Sections 151.008(a) and 151.103, and the listed price of the item for sale, lease, or rent is presumed to be the sales price for purposes of Sections 151.101 and 151.103. Notwithstanding Section 151.103, the referrer is not required to collect a use tax imposed under this subchapter that is due from a purchaser if:

(1) the retailer for whom the referrer facilitates the sale, lease, or rental collects the tax from the purchaser; or

(2) the referrer:

(A) holds a referrer's permit issued under Section 151.1065; and

(B) is in compliance with Section 151.111.

(d) For purposes of Subsection (c), a referrer may presume that a retailer registered with the comptroller under Section 151.106 collects the use tax from a purchaser.

(e) Subject to Subsection (f), a referrer is not subject to liability under Subchapter L for failing to collect or remit the appropriate amount of use tax if, in determining the amount, the referrer relies exclusively on information provided by the retailer for whom the referrer facilitates the sale, lease, or rental of the tangible personal property on which the tax is due.

(f) Subsection (e) does not apply if:

(1) the referrer and the retailer for whom the referrer facilitated the sale, lease, or rental of tangible personal property have an ownership relationship designed with a principal purpose of relieving the referrer of liability as authorized by Subsection (e); or

(2) the referrer and the other retailer have a relationship described by Section 267(b) or 707(b)(1), Internal Revenue Code of 1986.

(g) The comptroller may adopt rules necessary to implement and administer this section, including rules establishing the requirements for an entity to be considered a referrer.

Sec. 151.111. REFERRER'S ANNUAL REPORT; NOTICE TO RETAILERS. (a) This section applies only to a referrer who is required to hold a referrer's permit under Section 151.1065.

(b) On January 1 of each year, a referrer shall:

(1) file with the comptroller a report that contains, for the preceding 12-month period:

(A) the name and address of each retailer with whom the referrer entered into an agreement described by Section 151.110(a)(1); and

(B) to the extent practicable, for each retailer required to be included in the report under Paragraph (A):

(i) the estimated total amount of sales attributable to referrals made by the referrer to that retailer;

(ii) the estimated total number of referrals made by the referrer to that retailer and the estimated number of those referrals that resulted in a purchase by a purchaser in this state; and

(iii) details about each referral made to the retailer, including the type and price of each item that was the subject of the referral; and

(2) provide notice to each retailer with whom the referrer entered into an agreement described by Section 151.110(a)(1) during the preceding 12-month period that:

(A) the retailer's sales in this state may be subject to a use tax under the laws of this state; and

(B) the referrer is required to annually report the information described by Subdivision (1) to this state.

(c) The report required under Subsection (b) may not contain personally identifiable information of any purchaser.

(d) Notwithstanding Subsection (b), a referrer may exclude from the report required under that subsection the name of, and any information relating to referrals to, a retailer for whom the referrer makes referrals if the retailer collects the use tax imposed under this subchapter from purchasers in this state. For purposes of this subsection, a referrer may presume that a retailer registered with the comptroller under Section 151.106 collects the tax.

(e) The comptroller may adopt rules necessary to implement and administer this section and may prescribe the form of the report and the notice required under this section.

SECTION 6. Section 151.403(b), Tax Code, is amended to read as follows:

(b) A retailer engaged in business in this state as provided by Section 151.107, 151.1075, 151.109, or 151.110 [of this code] shall file a tax report with respect to the use tax.

SECTION 7. The first report and notice required under Section 151.111, Tax Code, as added by this Act, are due January 1, 2018.

SECTION 8. The change in law made by this Act does not affect tax liability accruing before the effective date of this Act. That liability continues in effect as if this Act had not been enacted, and the former law is continued in effect for the collection of taxes due and for civil and criminal enforcement of the liability for those taxes.

SECTION 9. (a) The constitutionality and other validity under the state or federal constitution of all or any part of the amendments made to Chapter 151, Tax Code, by this Act may be determined in an action for declaratory judgment in a district court in Travis County under Chapter 37, Civil Practice and Remedies Code, except that this section does not authorize an award of attorney's fees against this state and Section 37.009, Civil Practice and Remedies Code, does not apply to an action filed under this section.

(b) An appeal of a declaratory judgment or order, however characterized, of a district court, including an appeal of the judgment of an appellate court, holding or otherwise determining that all or any part of the amendments made to Chapter 151, Tax Code, by this Act is constitutional or unconstitutional, or otherwise valid or invalid, under the state or federal constitution is an accelerated appeal.

(c) If the judgment or order is interlocutory, an interlocutory appeal may be taken from the judgment or order and is an accelerated appeal.

(d) A district court in Travis County may grant or deny a temporary or otherwise interlocutory injunction or a permanent injunction on the grounds of the constitutionality or unconstitutionality, or other validity or invalidity, under the state or federal constitution of all or any part of the amendments made to Chapter 151, Tax Code, by this Act.

(e) There is a direct appeal to the Texas Supreme Court from an order, however characterized, of a trial court granting or denying a temporary or otherwise interlocutory injunction or a permanent injunction on the grounds of the constitutionality or unconstitutionality, or other validity or invalidity, under the state or federal constitution of all or any part of the amendments made to Chapter 151, Tax Code, by this Act.

(f) The direct appeal is an accelerated appeal.

(g) This section exercises the authority granted by Section 3-b, Article V, Texas Constitution.

(h) The filing of a direct appeal under this section will automatically stay any temporary or otherwise interlocutory injunction or permanent injunction granted in accordance with this section pending final determination by the Texas Supreme Court, unless the supreme court makes specific findings that the applicant seeking such injunctive relief has pleaded and proved that:

(1) the applicant has a probable right to the relief it seeks on final hearing; and

(2) the applicant will suffer a probable injury that is imminent and irreparable, and that the applicant has no other adequate legal remedy.

(i) An appeal under this section, including an interlocutory, accelerated, or direct appeal, is governed, as applicable, by the Texas Rules of Appellate Procedure, including Rules 25.1(d)(6), 26.1(b), 28.1, 28.3, 32.1(g), 37.3(a)(1), 38.6(a) and (b), 40.1(b), and 49.4.

SECTION 10. This Act takes effect September 1, 2017.