[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4391 Enrolled Bill (ENR)]

        H.R.4391

                       One Hundred Sixth Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

           Begun and held at the City of Washington on Monday,
             the twenty-fourth day of January, two thousand


                                 An Act


 
    To amend title 4 of the United States Code to establish sourcing 
 requirements for State and local taxation of mobile telecommunication 
                                services.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Mobile Telecommunications Sourcing 
Act''.

SEC. 2. AMENDMENTS TO TITLE 4 OF THE UNITED STATES CODE.

    (a) Amendment Relating to the States.--Chapter 4 of title 4 of the 
United States Code is amended by adding at the end the following:

``Sec. 116. Rules for determining State and local government treatment 
            of charges related to mobile telecommunications services

    ``(a) Application of This Section Through Section 126.--This 
section through 126 of this title apply to any tax, charge, or fee 
levied by a taxing jurisdiction as a fixed charge for each customer or 
measured by gross amounts charged to customers for mobile 
telecommunications services, regardless of whether such tax, charge, or 
fee is imposed on the vendor or customer of the service and regardless 
of the terminology used to describe the tax, charge, or fee.
    ``(b) General Exceptions.--This section through 126 of this title 
do not apply to--
        ``(1) any tax, charge, or fee levied upon or measured by the 
    net income, capital stock, net worth, or property value of the 
    provider of mobile telecommunications service;
        ``(2) any tax, charge, or fee that is applied to an equitably 
    apportioned amount that is not determined on a transactional basis;
        ``(3) any tax, charge, or fee that represents compensation for 
    a mobile telecommunications service provider's use of public rights 
    of way or other public property, provided that such tax, charge, or 
    fee is not levied by the taxing jurisdiction as a fixed charge for 
    each customer or measured by gross amounts charged to customers for 
    mobile telecommunication services;
        ``(4) any generally applicable business and occupation tax that 
    is imposed by a State, is applied to gross receipts or gross 
    proceeds, is the legal liability of the home service provider, and 
    that statutorily allows the home service provider to elect to use 
    the sourcing method required in this section through 126 of this 
    title;
        ``(5) any fee related to obligations under section 254 of the 
    Communications Act of 1934; or
        ``(6) any tax, charge, or fee imposed by the Federal 
    Communications Commission.
    ``(c) Specific Exceptions.--This section through 126 of this 
title--
        ``(1) do not apply to the determination of the taxing situs of 
    prepaid telephone calling services;
        ``(2) do not affect the taxability of either the initial sale 
    of mobile telecommunications services or subsequent resale of such 
    services, whether as sales of such services alone or as a part of a 
    bundled product, if the Internet Tax Freedom Act would preclude a 
    taxing jurisdiction from subjecting the charges of the sale of such 
    services to a tax, charge, or fee, but this section provides no 
    evidence of the intent of Congress with respect to the 
    applicability of the Internet Tax Freedom Act to such charges; and
        ``(3) do not apply to the determination of the taxing situs of 
    air-ground radiotelephone service as defined in section 22.99 of 
    title 47 of the Code of Federal Regulations as in effect on June 1, 
    1999.

``Sec. 117. Sourcing rules

    ``(a) Treatment of Charges for Mobile Telecommunications 
Services.--Notwithstanding the law of any State or political 
subdivision of any State, mobile telecommunications services provided 
in a taxing jurisdiction to a customer, the charges for which are 
billed by or for the customer's home service provider, shall be deemed 
to be provided by the customer's home service provider.
    ``(b) Jurisdiction.--All charges for mobile telecommunications 
services that are deemed to be provided by the customer's home service 
provider under sections 116 through 126 of this title are authorized to 
be subjected to tax, charge, or fee by the taxing jurisdictions whose 
territorial limits encompass the customer's place of primary use, 
regardless of where the mobile telecommunication services originate, 
terminate, or pass through, and no other taxing jurisdiction may impose 
taxes, charges, or fees on charges for such mobile telecommunications 
services.

``Sec. 118. Limitations

    ``Sections 116 through 126 of this title do not--
        ``(1) provide authority to a taxing jurisdiction to impose a 
    tax, charge, or fee that the laws of such jurisdiction do not 
    authorize such jurisdiction to impose; or
        ``(2) modify, impair, supersede, or authorize the modification, 
    impairment, or supersession of the law of any taxing jurisdiction 
    pertaining to taxation except as expressly provided in sections 116 
    through 126 of this title.

``Sec. 119. Electronic databases for nationwide standard numeric 
            jurisdictional codes

    ``(a) Electronic Database.--
        ``(1)  Provision of database.--A State may provide an 
    electronic database to a home service provider or, if a State does 
    not provide such an electronic database to home service providers, 
    then the designated database provider may provide an electronic 
    database to a home service provider.
        ``(2) Format.--(A) Such electronic database, whether provided 
    by the State or the designated database provider, shall be provided 
    in a format approved by the American National Standards Institute's 
    Accredited Standards Committee X12, that, allowing for de minimis 
    deviations, designates for each street address in the State, 
    including to the extent practicable, any multiple postal street 
    addresses applicable to one street location, the appropriate taxing 
    jurisdictions, and the appropriate code for each taxing 
    jurisdiction, for each level of taxing jurisdiction, identified by 
    one nationwide standard numeric code.
        ``(B) Such electronic database shall also provide the 
    appropriate code for each street address with respect to political 
    subdivisions which are not taxing jurisdictions when reasonably 
    needed to determine the proper taxing jurisdiction.
        ``(C) The nationwide standard numeric codes shall contain the 
    same number of numeric digits with each digit or combination of 
    digits referring to the same level of taxing jurisdiction 
    throughout the United States using a format similar to FIPS 55-3 or 
    other appropriate standard approved by the Federation of Tax 
    Administrators and the Multistate Tax Commission, or their 
    successors. Each address shall be provided in standard postal 
    format.
    ``(b) Notice; Updates.--A State or designated database provider 
that provides or maintains an electronic database described in 
subsection (a) shall provide notice of the availability of the then 
current electronic database, and any subsequent revisions thereof, by 
publication in the manner normally employed for the publication of 
informational tax, charge, or fee notices to taxpayers in such State.
    ``(c) User Held Harmless.--A home service provider using the data 
contained in an electronic database described in subsection (a) shall 
be held harmless from any tax, charge, or fee liability that otherwise 
would be due solely as a result of any error or omission in such 
database provided by a State or designated database provider. The home 
service provider shall reflect changes made to such database during a 
calendar quarter not later than 30 days after the end of such calendar 
quarter for each State that issues notice of the availability of an 
electronic database reflecting such changes under subsection (b).

``Sec. 120. Procedure if no electronic database provided

    ``(a) Safe Harbor.--If neither a State nor designated database 
provider provides an electronic database under section 119, a home 
service provider shall be held harmless from any tax, charge, or fee 
liability in such State that otherwise would be due solely as a result 
of an assignment of a street address to an incorrect taxing 
jurisdiction if, subject to section 121, the home service provider 
employs an enhanced zip code to assign each street address to a 
specific taxing jurisdiction for each level of taxing jurisdiction and 
exercises due diligence at each level of taxing jurisdiction to ensure 
that each such street address is assigned to the correct taxing 
jurisdiction. If an enhanced zip code overlaps boundaries of taxing 
jurisdictions of the same level, the home service provider must 
designate one specific jurisdiction within such enhanced zip code for 
use in taxing the activity for such enhanced zip code for each level of 
taxing jurisdiction. Any enhanced zip code assignment changed in 
accordance with section 121 is deemed to be in compliance with this 
section. For purposes of this section, there is a rebuttable 
presumption that a home service provider has exercised due diligence if 
such home service provider demonstrates that it has--
        ``(1) expended reasonable resources to implement and maintain 
    an appropriately detailed electronic database of street address 
    assignments to taxing jurisdictions;
        ``(2) implemented and maintained reasonable internal controls 
    to promptly correct misassignments of street addresses to taxing 
    jurisdictions; and
        ``(3) used all reasonably obtainable and usable data pertaining 
    to municipal annexations, incorporations, reorganizations and any 
    other changes in jurisdictional boundaries that materially affect 
    the accuracy of such database.
    ``(b) Termination of Safe Harbor.--Subsection (a) applies to a home 
service provider that is in compliance with the requirements of 
subsection (a), with respect to a State for which an electronic 
database is not provided under section 119 until the later of--
        ``(1) 18 months after the nationwide standard numeric code 
    described in section 119(a) has been approved by the Federation of 
    Tax Administrators and the Multistate Tax Commission; or
        ``(2) 6 months after such State or a designated database 
    provider in such State provides such database as prescribed in 
    section 119(a).

``Sec. 121. Correction of erroneous data for place of primary use

    ``(a) In General.--A taxing jurisdiction, or a State on behalf of 
any taxing jurisdiction or taxing jurisdictions within such State, 
may--
        ``(1) determine that the address used for purposes of 
    determining the taxing jurisdictions to which taxes, charges, or 
    fees for mobile telecommunications services are remitted does not 
    meet the definition of place of primary use in section 124(8) and 
    give binding notice to the home service provider to change the 
    place of primary use on a prospective basis from the date of notice 
    of determination if--
            ``(A) if the taxing jurisdiction making such determination 
        is not a State, such taxing jurisdiction obtains the consent of 
        all affected taxing jurisdictions within the State before 
        giving such notice of determination; and
            ``(B) before the taxing jurisdiction gives such notice of 
        determination, the customer is given an opportunity to 
        demonstrate in accordance with applicable State or local tax, 
        charge, or fee administrative procedures that the address is 
        the customer's place of primary use;
        ``(2) determine that the assignment of a taxing jurisdiction by 
    a home service provider under section 120 does not reflect the 
    correct taxing jurisdiction and give binding notice to the home 
    service provider to change the assignment on a prospective basis 
    from the date of notice of determination if--
            ``(A) if the taxing jurisdiction making such determination 
        is not a State, such taxing jurisdiction obtains the consent of 
        all affected taxing jurisdictions within the State before 
        giving such notice of determination; and
            ``(B) the home service provider is given an opportunity to 
        demonstrate in accordance with applicable State or local tax, 
        charge, or fee administrative procedures that the assignment 
        reflects the correct taxing jurisdiction.

``Sec.  122. Determination of place of primary use

    ``(a) Place of Primary Use.--A home service provider shall be 
responsible for obtaining and maintaining the customer's place of 
primary use (as defined in section 124). Subject to section 121, and if 
the home service provider's reliance on information provided by its 
customer is in good faith, a taxing jurisdiction shall--
        ``(1) allow a home service provider to rely on the applicable 
    residential or business street address supplied by the home service 
    provider's customer; and
        ``(2) not hold a home service provider liable for any 
    additional taxes, charges, or fees based on a different 
    determination of the place of primary use for taxes, charges, or 
    fees that are customarily passed on to the customer as a separate 
    itemized charge.
    ``(b) Address Under Existing Agreements.--Except as provided in 
section 121, a taxing jurisdiction shall allow a home service provider 
to treat the address used by the home service provider for tax purposes 
for any customer under a service contract or agreement in effect 2 
years after the date of the enactment of the Mobile Telecommunications 
Sourcing Act as that customer's place of primary use for the remaining 
term of such service contract or agreement, excluding any extension or 
renewal of such service contract or agreement, for purposes of 
determining the taxing jurisdictions to which taxes, charges, or fees 
on charges for mobile telecommunications services are remitted.

``Sec. 123. Scope; special rules

    ``(a) Act Does Not Supersede Customer's Liability to Taxing 
Jurisdiction.--Nothing in sections 116 through 126 modifies, impairs, 
supersedes, or authorizes the modification, impairment, or supersession 
of, any law allowing a taxing jurisdiction to collect a tax, charge, or 
fee from a customer that has failed to provide its place of primary 
use.
    ``(b) Additional Taxable Charges.--If a taxing jurisdiction does 
not otherwise subject charges for mobile telecommunications services to 
taxation and if these charges are aggregated with and not separately 
stated from charges that are subject to taxation, then the charges for 
nontaxable mobile telecommunications services may be subject to 
taxation unless the home service provider can reasonably identify 
charges not subject to such tax, charge, or fee from its books and 
records that are kept in the regular course of business.
    ``(c) Nontaxable Charges.--If a taxing jurisdiction does not 
subject charges for mobile telecommunications services to taxation, a 
customer may not rely upon the nontaxability of charges for mobile 
telecommunications services unless the customer's home service provider 
separately states the charges for nontaxable mobile telecommunications 
services from taxable charges or the home service provider elects, 
after receiving a written request from the customer in the form 
required by the provider, to provide verifiable data based upon the 
home service provider's books and records that are kept in the regular 
course of business that reasonably identifies the nontaxable charges.

``Sec. 124. Definitions

    ``In sections 116 through 126 of this title:
        ``(1) Charges for mobile telecommunications services.--The term 
    `charges for mobile telecommunications services' means any charge 
    for, or associated with, the provision of commercial mobile radio 
    service, as defined in section 20.3 of title 47 of the Code of 
    Federal Regulations as in effect on June 1, 1999, or any charge 
    for, or associated with, a service provided as an adjunct to a 
    commercial mobile radio service, that is billed to the customer by 
    or for the customer's home service provider regardless of whether 
    individual transmissions originate or terminate within the licensed 
    service area of the home service provider.
        ``(2) Customer.--
            ``(A) In general.--The term `customer' means--
                ``(i) the person or entity that contracts with the home 
            service provider for mobile telecommunications services; or
                ``(ii) if the end user of mobile telecommunications 
            services is not the contracting party, the end user of the 
            mobile telecommunications service, but this clause applies 
            only for the purpose of determining the place of primary 
            use.
            ``(B) The term `customer' does not include--
                ``(i) a reseller of mobile telecommunications service; 
            or
                ``(ii) a serving carrier under an arrangement to serve 
            the customer outside the home service provider's licensed 
            service area.
        ``(3) Designated database provider.--The term `designated 
    database provider' means a corporation, association, or other 
    entity representing all the political subdivisions of a State that 
    is--
            ``(A) responsible for providing an electronic database 
        prescribed in section 119(a) if the State has not provided such 
        electronic database; and
            ``(B) approved by municipal and county associations or 
        leagues of the State whose responsibility it would otherwise be 
        to provide such database prescribed by sections 116 through 126 
        of this title.
        ``(4) Enhanced zip code.--The term `enhanced zip code' means a 
    United States postal zip code of 9 or more digits.
        ``(5) Home service provider.--The term `home service provider' 
    means the facilities-based carrier or reseller with which the 
    customer contracts for the provision of mobile telecommunications 
    services.
        ``(6) Licensed service area.--The term `licensed service area' 
    means the geographic area in which the home service provider is 
    authorized by law or contract to provide commercial mobile radio 
    service to the customer.
        ``(7) Mobile telecommunications service.--The term `mobile 
    telecommunications service' means commercial mobile radio service, 
    as defined in section 20.3 of title 47 of the Code of Federal 
    Regulations as in effect on June 1, 1999.
        ``(8) Place of primary use.--The term `place of primary use' 
    means the street address representative of where the customer's use 
    of the mobile telecommunications service primarily occurs, which 
    must be--
            ``(A) the residential street address or the primary 
        business street address of the customer; and
            ``(B) within the licensed service area of the home service 
        provider.
        ``(9) Prepaid telephone calling services.--The term `prepaid 
    telephone calling service' means the right to purchase exclusively 
    telecommunications services that must be paid for in advance, that 
    enables the origination of calls using an access number, 
    authorization code, or both, whether manually or electronically 
    dialed, if the remaining amount of units of service that have been 
    prepaid is known by the provider of the prepaid service on a 
    continuous basis.
        ``(10) Reseller.--The term `reseller'--
            ``(A) means a provider who purchases telecommunications 
        services from another telecommunications service provider and 
        then resells, uses as a component part of, or integrates the 
        purchased services into a mobile telecommunications service; 
        and
            ``(B) does not include a serving carrier with which a home 
        service provider arranges for the services to its customers 
        outside the home service provider's licensed service area.
        ``(11) Serving carrier.--The term `serving carrier' means a 
    facilities-based carrier providing mobile telecommunications 
    service to a customer outside a home service provider's or 
    reseller's licensed service area.
        ``(12) Taxing jurisdiction.--The term `taxing jurisdiction' 
    means any of the several States, the District of Columbia, or any 
    territory or possession of the United States, any municipality, 
    city, county, township, parish, transportation district, or 
    assessment jurisdiction, or any other political subdivision within 
    the territorial limits of the United States with the authority to 
    impose a tax, charge, or fee.

``Sec. 125. Nonseverability

    ``If a court of competent jurisdiction enters a final judgment on 
the merits that--
        ``(1) is based on Federal law;
        ``(2) is no longer subject to appeal; and
        ``(3) substantially limits or impairs the essential elements of 
    sections 116 through 126 of this title,
then sections 116 through 126 of this title are invalid and have no 
legal effect as of the date of entry of such judgment.

``Sec. 126. No inference

    ``(a) Internet Tax Freedom Act.--Nothing in sections 116 through 
this section of this title shall be construed as bearing on 
Congressional intent in enacting the Internet Tax Freedom Act or to 
modify or supersede the operation of such Act.
    ``(b) Telecommunications Act of 1996.--Nothing in sections 116 
through this section of this title shall limit or otherwise affect the 
implementation of the Telecommunications Act of 1996 or the amendments 
made by such Act.''.
    (b) Technical Amendment.--The table of sections of chapter 4 of 
title 4, United States Code, is amended by adding the following after 
the item relating to section 115:
``116. Rules for determining State and local government treatment of 
          charges 
          related to mobile telecommunications services.
``117. Sourcing rules.
``118. Limitations.
``119. Electronic databases for nationwide standard numeric 
          jurisdictional codes.
``120. Procedure if no electronic database provided.
``121. Correction of erroneous data for place of primary use.
``122. Determination of place of primary use.
``123. Scope; special rules.
``124. Definitions.
``125. Nonseverability.
``126. No inference.''.

SEC. 3. EFFECTIVE DATE; APPLICATION OF AMENDMENT.

    (a) Effective Date.--Except as provided in subsection (b), this Act 
and the amendment made by this Act shall take effect on the date of the 
enactment of this Act.
    (b) Application of Act.--The amendment made by this Act shall apply 
only to customer bills issued after the first day of the first month 
beginning more than 2 years after the date of the enactment of this 
Act.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.