STREAMLINED SALES AND USE TAX AGREEMENT
Adopted November 12, 2002
(Pending final review)
ARTICLE I
Purpose and Principle
101 Title . .
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. p. 6
102 Fundamental Purpose . . .
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p. 6
103 Taxing Authority Preserved
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. p. 6
104 Defined Terms . .
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. p. 6
105 Treatment of Vending Machines .
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p. 7
ARTICLE II
Definitions
201 Agent . .
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. p. 8
202 Certified Automated System (CAS)
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. p. 8
203 Certified Service Provider (CSP)
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. p. 8
204 Entity-Based Exemption . . . .
. p. 8
205 Model 1 Seller . .
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. p. 8
206 Model 2 Seller . .
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. p. 8
207 Model 3 Seller . .
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. p. 8
208 Person .
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. p. 8
209 Product-Based Exemption
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p. 8
210 Purchaser
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p. 9
211 Registered Under This Agreement .
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p. 9
212 Seller . .
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. p. 9
213 State . .
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. p. 9
214 Use-Based Exemption
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. p. 9
ARTICLE III
Requirements Each
State Must Accept to Participate
301 State Level Administration.
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p. 10
302 State and Local Tax Bases . .
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p. 10
303 Seller Registration . .
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. p. 10
304 Notice for Tax Changes . .
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p. 11
305 Local Rate and Boundary Changes
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. p. 11
306 Relief from Certain Liability . .
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p. 12
307 Database Requirements and Exceptions .
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. p. 13
308 State and Local Tax Rates
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p. 14
309
Application of General Sourcing Rules and Exclusions From the Rules p. 14
310 General Sourcing Rules . .
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p. 16
311 General Sourcing Definitions
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p. 16
312
Multiple Points of Use
p. 17
313
Direct Mail Sourcing
p.
17
314
Telecommunication Sourcing Rule
p.
18
315
Telecommunication Sourcing Definitions . . .
. p. 20
316 Enactment of Exemptions .
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. p. 22
317 Administration of Exemptions .
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p. 22
318 Uniform Tax Returns . .
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. p. 23
319 Uniform Rules for Remittances of Funds . . .
. p. 24
320 Uniform Rules for Recovery of Bad Debts . . .
. p. 25
321 Confidentiality and Privacy Protections under
Model 1 . .
p. 26
322 Sales Tax Holidays . .
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. p. 28
323 Caps and Thresholds . .
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. p. 29
324 Rounding Rule
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p. 29
325 Customer Refund Procedures . .
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p. 30
326 Direct Pay Permit . .
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. p. 30
327 Library of Definitions
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. p. 31
328 Taxability Matrix . . .
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p. 31
329 Effective Date for Rate Changes . . .
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p. 31
ARTICLE IV
Seller Registration
ARTICLE V
Provider and System
Certification
ARTICLE VI
Monetary Allowances for New Technological
Models For Sales
Tax Collection
601 Monetary Allowance Under Model 1 .
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p. 37
602 Monetary Allowance for Model 2 Sellers .
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. p. 37
603 Monetary Allowance for Model 3 Sellers
and All Other Sellers Not
Under Models 1 or 2 . .
. p. 38
ARTICLE VII
Agreement Organization
701 Effective Date . .
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p. 39
702 Approval of Initial States .
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. p. 39
ARTICLE VIII
State Entry and Withdrawal
Amendments and Interpretations
901 Amendments to Agreement .
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. p. 45
902 Interpretations of Agreement .
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. p. 45
903 Definition Requests
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. p. 45
ARTICLE X
Issue Resolution Process
1001 Rules and Procedures for Dispute Resolution . . .
p. 47
1002 Petition for Resolution . .
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p. 47
1003 Final Decision of Governing Board
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. p. 47
1004 Limited Scope of this Article . .
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p. 47
ARTICLE
XI
Relationship
of Agreement to Member States and Persons
1101 Cooperating Sovereigns .
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. p. 49
1102 Relationship to State Law .
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. p. 49
1103 Limited Binding and Beneficial Effect . . .
. p. 49
1104 Final Determinations . .
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. p. 50
ARTICLE XII
Review of Costs
and Benefits Associated with the System
1201 Review of Costs and Benefits
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. p. 51
Petition for Membership.
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. p. 52
Appendix B
Index of Definitions . .
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p. 53
Appendix C
Library of Definitions . .
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p. 56
ARTICLE I
PURPOSE AND PRINCIPLE
Section 101: TITLE
This multistate Agreement shall be referred to, cited, and known
as the Streamlined Sales and Use Tax Agreement.
It is the purpose of this Agreement to simplify and modernize sales
and use tax administration in the member states in order to substantially
reduce the burden of tax compliance. The Agreement focuses on improving sales
and use tax administration systems for all sellers and for all types of commerce
through all of the following:
A.
State level administration of sales and use tax collections.
B.
Uniformity in the state and local tax bases.
C.
Uniformity of major tax base definitions.
D.
Central, electronic registration system for all member states.
E.
Simplification of state and local tax rates.
F.
Uniform sourcing rules for all taxable transactions.
G.
Simplified administration of exemptions.
H.
Simplified tax returns.
I.
Simplification of tax remittances.
J.
Protection of consumer privacy.
Section 103: TAXING AUTHORITY PRESERVED
This Agreement shall not be construed as intending to influence a
member state to impose a tax on or provide an exemption from tax for any item
or service. However, if a member state chooses to tax an item or exempt an
item from tax, that state shall adhere to the provisions concerning definitions
as set out in Article III of this Agreement.
Section 104: DEFINED TERMS
An alphabetical list of all
the terms defined in the Agreement and their location in the Agreement is
found in Appendix B of this Agreement, the Index of Definitions. Terms defined
for use within this Agreement are set out in Article II of the Agreement.
Many of the uniform definitions for application in the sales and use tax laws
of the member states are set out in Appendix C of this Agreement, the Library
of Definitions. Definitions that are
not set out in Appendix C are defined when applied in a particular section
of the Agreement and are set out in that section of the Agreement. The appendices
have the same effect as the Articles in the Agreement.
The provisions of the Agreement do not apply to vending machines
sales. The Agreement does not restrict how a member state taxes vending machine
sales.
ARTICLE II
DEFINITIONS
The following definitions apply in this Agreement:
Section 201:
AGENT
A person appointed by a seller to represent the seller before the
member states.
Section 202:
CERTIFIED AUTOMATED SYSTEM (CAS)
Software certified under the Agreement to calculate 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.
Section 203:
CERTIFIED SERVICE PROVIDER (CSP)
An agent certified under the Agreement to perform all the seller's
sales and use tax functions, other than the seller's obligation to remit tax
on its own purchases.
Section 204:
ENTITY-BASED EXEMPTION
An exemption based on who purchases the product or who sells the
product.
Section 205:
MODEL 1 SELLER
A seller that has selected a CSP as its agent to perform all the
seller's sales and use tax functions, other than the seller's obligation to
remit tax on its own purchases.
Section 206:
MODEL 2 SELLER
A seller that has selected a CAS to perform part of its sales and
use tax functions, but retains responsibility for remitting the tax.
Section 207:
MODEL 3 SELLER
A seller that has sales in at least five member states, has total
annual sales revenue of at least five hundred million dollars, 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. As used in this definition, a seller
includes an affiliated group of sellers using the same proprietary system.
Section 208:
PERSON
An individual, trust, estate, fiduciary, partnership, limited liability
company, limited liability partnership, corporation, or any other legal entity.
Section 209:
PRODUCT-BASED EXEMPTION
An exemption based on the description of the product and not based
on who purchases the product or how the purchaser intends to use the product.
Section 210:
PURCHASER
A person to whom a sale of personal property is made or to whom a
service is furnished.
Section 211:
REGISTERED UNDER THIS AGREEMENT
Registration by a seller with the member states under the central
registration system provided in Article IV of this Agreement.
Section 212:
SELLER
A person making sales, leases, or rentals of personal property or
services.
Section 213:
STATE
Any state of the United States and the District of Columbia.
Section 214:
USE-BASED EXEMPTION
An exemption based on the purchaser’s use of the product.
ARTICLE III
REQUIREMENTS EACH STATE MUST ACCEPT TO PARTICIPATE
Section 301: STATE LEVEL ADMINISTRATION
Each member
state shall provide state level administration of sales and use taxes. The
state level administration may be performed by a member state's Tax Commission,
Department of Revenue, or any other single entity designated by state law.
Sellers are only required to register with, file returns with, and
remit funds to the state level authority.
Each member state shall provide for collection of any local taxes and
distribution of them to the appropriate taxing jurisdictions.
Each member state shall conduct, or authorize others to conduct on
its behalf, all audits of the sellers registered under the Agreement for that
state’s tax and the tax of its local jurisdictions, and local jurisdictions
shall not conduct independent sales or use tax audits of sellers registered
under the Agreement.
Section 302:
STATE AND LOCAL TAX BASES
Through December 31, 2005, if a member state has local jurisdictions
that levy a sales or use tax, all local jurisdictions in the state shall have
a common tax base. After December 31, 2005, the tax base for local jurisdictions
shall be identical to the state tax base unless otherwise prohibited by federal
law. This section does not apply to sales or use taxes levied on the retail
sale or transfer of motor vehicles, aircraft, watercraft, modular homes, manufactured
homes, or mobile homes.
Section 303:
SELLER REGISTRATION
Each member state shall participate in an online sales and use tax
registration system in cooperation with the other member states. Under this
system:
A.
A seller registering under the Agreement is registered in each of
the member states.
B.
The member states agree not to require the payment of any registration
fees or other charges for a seller to register in a state in which the seller
has no legal requirement to register.
C.
A written signature from the seller is not required.
D.
An agent may register a seller under uniform procedures adopted by
the member states.
E.
A seller may cancel its registration under the system at any time
under uniform procedures adopted by the governing board. Cancellation does
not relieve the seller of its liability for remitting to the proper states
any taxes collected.
Section 304:
NOTICE FOR STATE TAX CHANGES
A.
Each member state shall lessen the difficulties faced by sellers
when there is a change in a state sales or use tax rate or base by making
a reasonable effort to do all of the following:
1.
Provide sellers with as much advance notice as practicable of a rate
change.
2.
Limit the effective date of a rate change to the first day of a calendar
quarter.
3.
Notify sellers of legislative changes in the tax base and amendments
to sales and use tax rules and regulations.
B.
Failure of a seller to receive notice or failure of a member state
to provide notice or limit the effective date of a rate change shall not relieve
the seller of its obligation to collect sales or use taxes for that member
state.
Each member state that has local jurisdictions that levy a sales
or use tax shall:
A.
Provide that local rate changes will be effective only on the first
day of a calendar quarter after a minimum of sixty days’ notice to sellers.
B.
Apply local sales tax rate changes to purchases from printed catalogs
wherein the purchaser computed the tax based upon local tax rates published
in the catalog only on the first day of a calendar quarter after a minimum
of one hundred twenty days’ notice to sellers.
C.
For sales and use tax purposes only, apply local jurisdiction boundary
changes only on the first day of a calendar quarter after a minimum of sixty
days’ notice to sellers.
D.
Provide and maintain a database that describes boundary changes for
all taxing jurisdictions. This database shall include a description of the
change and the effective date of the change for sales and use tax purposes.
E.
Provide and maintain a database of all sales and use tax rates for
all of the jurisdictions levying taxes within the state. For the identification
of states, counties, cities, and parishes, codes corresponding to the rates
must be provided according to Federal Information Processing Standards (FIPS)
as developed by the National Institute of Standards and Technology. For the
identification of all other jurisdictions, codes corresponding to the rates
must be in the format determined by the governing board.
F.
Provide and maintain a database that assigns each five digit and
nine digit zip code within a member state to the proper tax rates and jurisdictions.
The state must apply the lowest combined tax rate imposed in the zip code
area if the area includes more than one tax rate in any level of taxing jurisdictions.
If a nine digit zip code designation is not available for a street address
or if a seller is unable to determine the nine digit zip code designation
of a purchaser after exercising due diligence to determine the designation,
the seller may apply the rate for the five digit zip code area. For the purposes
of this section, there is a rebuttable presumption that a seller has exercised
due diligence if the seller has attempted to determine the nine digit zip
code designation by utilizing software approved by the governing board that
makes this designation from the street address and the five digit zip code
of the purchaser.
G.
Participate with other member states in the development of an address-based
system for assigning taxing jurisdictions. The system must meet the requirements
developed pursuant to the federal Mobile Telecommunications Sourcing Act (4
U.S.C. Sec. 119). The governing board
may allow a member state to require sellers that register under this Agreement
to use an address-based system provided by that member state. If any member
state develops an address-based assignment system pursuant to the Mobile Telecommunications
Sourcing Act, a seller may use that system in place of the system provided
for in subsection (F) of this section.
Section 306: RELIEF FROM CERTAIN LIABILITY
Each member state shall relieve
sellers and CSPs from liability to the member state and local jurisdictions
for having charged and collected the incorrect amount of sales or use tax
resulting from the seller or CSP relying on erroneous data provided by a member
state on tax rates, boundaries, or taxing jurisdiction assignments. A member
state that provides an address-based system for assigning taxing jurisdictions
pursuant to Section 305, subsection (G) or pursuant to the federal Mobile
Telecommunications Sourcing Act will not be required to provide liability
relief for errors resulting from the reliance on the information provided
by the member state under the provisions of Section 305, subsection (F).
Section 307: DATABASE REQUIREMENTS AND EXCEPTIONS
A.
The electronic databases provided for in Section 305, subsections
(D), (E), (F), and (G) shall be in a downloadable format approved by the governing
board.
B.
The provisions of Section 305, subsections (F) and (G) do not apply
when the purchased product is received by the purchaser at the business location
of the seller.
C.
The databases provided by Section 305, subsections (D), (E), and
(F) are not a requirement of a state prior to entering into the Agreement.
The governing board shall establish the effective dates for availability and
use of the databases.
Section 308:
STATE AND LOCAL TAX RATES
A.
No member state shall have multiple state sales and use tax rates
on items of personal property or services after December 31, 2005, except
that a member state may impose a single additional rate, which may be zero,
on food and food ingredients and drugs as defined by state law pursuant to
the Agreement.
B.
A member state that has local jurisdictions that levy a sales or
use tax shall not have more than one local sales tax rate or more than one
local use tax rate per local jurisdiction.
If the local jurisdiction levies both a sales tax and use tax, the
local rates must be identical.
C.
The provisions of this section do not apply to sales or use taxes
levied on electricity, piped natural or artificial gas, or other heating fuels
delivered by the seller, or the retail sale or transfer of motor vehicles,
aircraft, watercraft, modular homes, manufactured homes, or mobile homes.
Section 309: APPLICATION OF GENERAL SOURCING RULES AND
EXCLUSIONS FROM THE RULES
A.
Each member state shall agree to require sellers to source the retail
sale of a product in accordance with Section 310. The provisions of Section
310 apply regardless of the characterization of a product as tangible personal
property, a digital good, or a service. The provisions of Section 310 only
apply to determine a seller's obligation to pay or collect and remit a sales
or use tax with respect to the seller's retail sale of a product. These provisions
do not affect the obligation of a purchaser or lessee to remit tax on the
use of the product to the taxing jurisdictions of that use.
B.
Section 310 does not apply to sales or use taxes levied on the following:
1.
The retail sale or transfer of watercraft, modular homes, manufactured
homes, or mobile homes. These items must be sourced according to the requirements
of each member state.
2.
The retail sale, excluding lease or rental, of motor vehicles, trailers,
semi-trailers, or aircraft that do not qualify as transportation equipment,
as defined in Section 310, subsection (D). The retail sale of these items
shall be sourced according to the requirements of each member state, and the
lease or rental of these items must be sourced according to Section 310, subsection
(C).
3.
Telecommunications services, as set out in Section 315, shall be
sourced in accordance with Section 314.
Section 310: GENERAL SOURCING RULES
A.
The retail sale, excluding lease or rental, of a product shall be
sourced as follows:
1.
When the product is received by the purchaser at a business location
of the seller, the sale is sourced to that business location.
2.
When the product is not received by the purchaser at a business location
of the seller, the sale is sourced to the location where receipt by the purchaser
(or the purchaser's donee, designated as such by the purchaser) occurs, including
the location indicated by instructions for delivery to the purchaser (or donee),
known to the seller.
3.
When subsections (A)(1) and (A)(2) do not apply, the sale is sourced
to the location indicated by an address for the purchaser that is available
from the business records of the seller that are maintained in the ordinary
course of the seller's business when use of this address does not constitute
bad faith.
4.
When subsections (A)(1), (A)(2), and (A)(3) do not apply, the sale
is sourced to the location indicated by an address for the purchaser obtained
during the consummation of the sale, including the address of a purchaser's
payment instrument, if no other address is available, when use of this address
does not constitute bad faith.
5.
When none of the previous rules of subsections (A)(1), (A)(2), (A)(3),
or (A)(4) apply, including the circumstance in which the seller is without
sufficient information to apply the previous rules, then the location will
be determined by the address from which tangible personal property was shipped,
from which the digital good or the computer software delivered electronically
was first available for transmission by the seller, or from which the service
was provided (disregarding for these purposes any location that merely provided
the digital transfer of the product sold).
B.
The lease or rental of tangible personal property, other than property
identified in subsection (C) or subsection (D), shall be sourced as follows:
1.
For a lease or rental that requires recurring periodic payments,
the first periodic payment is sourced the same as a retail sale in accordance
with the provisions of subsection (A). Periodic payments made subsequent to
the first payment are sourced to the primary property location for each period
covered by the payment. The primary property location shall be as indicated
by an address for the property provided by the lessee that is available to
the lessor from its records maintained in the ordinary course of business,
when use of this address does not constitute bad faith. The property location
shall not be altered by intermittent use at different locations, such as use
of business property that accompanies employees on business trips and service
calls.
2.
For a lease or rental that does not require recurring periodic payments,
the payment is sourced the same as a retail sale in accordance with the provisions
of subsection (A).
3.
This subsection does not affect the imposition or computation of
sales or use tax on leases or rentals based on a lump sum or accelerated basis,
or on the acquisition of property for lease.
C.
The lease or rental of motor vehicles, trailers, semi-trailers, or
aircraft that do not qualify as transportation equipment, as defined in subsection
(D), shall be sourced as follows:
1.
For a lease or rental that requires recurring periodic payments,
each periodic payment is sourced to the primary property location. The primary
property location shall be as indicated by an address for the property provided
by the lessee that is available to the lessor from its records maintained
in the ordinary course of business, when use of this address does not constitute
bad faith. This location shall not be altered by intermittent use at different
locations.
2.
For a lease or rental that does not require recurring periodic payments,
the payment is sourced the same as a retail sale in accordance with the provisions
of subsection (A).
3.
This subsection does not affect the imposition or computation of
sales or use tax on leases or rentals based on a lump sum or accelerated basis,
or on the acquisition of property for lease.
D.
The retail sale, including lease or rental, of transportation equipment
shall be sourced the same as a retail sale in accordance with the provisions
of subsection (A), notwithstanding the exclusion of lease or rental in subsection
(A). “Transportation equipment” means any of the following:
1.
Locomotives and railcars that are utilized for the carriage of persons
or property in interstate commerce.
2.
Trucks and truck-tractors with a Gross Vehicle Weight Rating (GVWR)
of 10,001 pounds or greater, trailers, semi-trailers, or passenger buses that
are:
a.
Registered through the International Registration Plan; and
b.
Operated under authority of a carrier authorized and certificated
by the U.S. Department of Transportation or another federal authority to engage
in the carriage of persons or property in interstate commerce.
3.
Aircraft that are operated by air carriers authorized and certificated
by the U.S. Department of Transportation or another federal or a foreign authority
to engage in the carriage of persons or property in interstate or foreign
commerce.
4.
Containers designed for use on and component parts attached or secured
on the items set forth in subsections (D)(1) through (D)(3).
Section 311: GENERAL SOURCING DEFINITIONS
For the purposes of Section
310, subsection (A), the terms "receive" and "receipt"
mean:
A.
Taking possession of tangible personal property,
B.
Making first use of services, or
C.
Taking possession or making first use of digital goods, whichever
comes first.
The terms "receive"
and "receipt" do not include possession by a shipping company on
behalf of the purchaser.
Section 312: MULTIPLE POINTS OF USE
Notwithstanding the provisions
of Section 310, a business purchaser that is not a holder of a direct pay
permit that knows at the time of its purchase of a digital good, computer
software delivered electronically, or a service that the digital good, computer
software delivered electronically, or service will be concurrently available
for use in more than one jurisdiction shall deliver to the seller in conjunction
with its purchase a form disclosing this fact ("Multiple Points of Use
or MPU" Exemption Form).
A.
Upon receipt of the MPU Exemption Form, the seller is relieved of
all obligation to collect, pay, or remit the applicable tax and the purchaser
shall be obligated to collect, pay, or remit the applicable tax on a direct
pay basis.
B.
A purchaser delivering the MPU Exemption Form may use any reasonable,
but consistent and uniform, method of apportionment that is supported by the
purchaser's business records as they exist at the time of the consummation
of the sale.
C.
The MPU Exemption Form will remain in effect for all future sales
by the seller to the purchaser (except as to the subsequent sale's specific
apportionment that is governed by the principle of subsection (B) and the
facts existing at the time of the sale) until it is revoked in writing.
D.
A holder of a direct pay permit shall not be required to deliver
a MPU Exemption Form to the seller. A direct pay permit holder shall follow
the provisions of subsection (B) in apportioning the tax due on a digital
good or a service that will be concurrently available for use in more than
one jurisdiction.
Section 313: Direct Mail SOURCING
A.
Notwithstanding Section 310, a purchaser of direct mail that is not
a holder of a direct pay permit shall provide to the seller in conjunction
with the purchase either a Direct Mail Form or information to show the jurisdictions
to which the direct mail is delivered to recipients.
1.
Upon receipt of the Direct Mail Form, the seller is relieved of all
obligations to collect, pay, or remit the applicable tax and the purchaser
is obligated to pay or remit the applicable tax on a direct pay basis. A Direct Mail Form shall remain in effect for
all future sales of direct mail by the seller to the purchaser until it is
revoked in writing.
2.
Upon receipt of information from the purchaser showing the jurisdictions
to which the direct mail is delivered to recipients, the seller shall collect
the tax according to the delivery information provided by the purchaser.
In the absence of bad faith, the seller is relieved of any further
obligation to collect tax on any transaction where the seller has collected
tax pursuant to the delivery information provided by the purchaser.
B.
If the purchaser of direct mail does not have a direct pay permit
and does not provide the seller with either a Direct Mail Form or delivery
information, as required by subsection (A) of this section, the seller shall
collect the tax according to Section 310, subsection (A)(5). Nothing in this paragraph shall limit a purchaser’s
obligation for sales or use tax to any state to which the direct mail is delivered.
C.
If a purchaser
of direct mail provides the seller with documentation of direct pay authority,
the purchaser shall not be required to provide a Direct Mail Form or delivery
information to the seller.
Section 314: TELECOMMUNCATION SOURCING RULE
A.
Except for the defined telecommunication services in subsection (C),
the sale of telecommunication service sold on a call-by-call basis shall be
sourced to (i) each level of taxing jurisdiction where the call originates
and terminates in that jurisdiction or (ii) each level of taxing jurisdiction
where the call either originates or terminates and in which the service address
is also located.
B.
Except for the defined telecommunication services in subsection (C),
a sale of telecommunications services sold on a basis other than a call-by-call
basis, is sourced to the customer's place of primary use.
C.
The sale of the following telecommunication services shall be sourced
to each level of taxing jurisdiction as follows:
1.
A sale of mobile telecommunications services other than air-to-ground
radiotelephone service and prepaid calling service, is sourced to the customer's
place of primary use as required by the Mobile Telecommunications Sourcing
Act.
2.
A sale of post-paid calling service is sourced to the origination
point of the telecommunications signal as first identified by either (i) the
seller's telecommunications system, or (ii) information received by the seller
from its service provider, where the system used to transport such signals
is not that of the seller.
3.
A sale of prepaid calling service is sourced in accordance with Section
310. Provided however, in the case of a sale of mobile telecommunications
service that is a prepaid telecommunications service, the rule provided in
Section 310, subsection (A)(5) shall include as an option the location associated
with the mobile telephone number.
4.
A sale of a private communication service is sourced as follows:
a. Service for a separate charge
related to a customer channel termination point is sourced to each level of
jurisdiction in which such customer channel termination point is located.
b. Service where all customer
termination points are located entirely within one jurisdiction or levels
of jurisdiction is sourced in such jurisdiction in which the customer channel
termination points are located.
c. Service for segments of a
channel between two customer channel termination points located in different
jurisdictions and which segment of channel are separately charged is sourced
fifty percent in each level of jurisdiction in which the customer channel
termination points are located.
d. Service for segments of a
channel located in more than one jurisdiction or levels of jurisdiction and
which segments are not separately billed is sourced in each jurisdiction based
on the percentage determined by dividing the number of customer channel termination
points in such jurisdiction by the total number of customer channel termination
points.
Section 315: TELECOMMUNICATION SOURCING DEFINITIONS
For the purpose of Section 314, the following definitions apply:
A.
"Air-to-Ground Radiotelephone service" means a radio service,
as that term is defined in 47 CFR 22.99, in which common carriers are authorized
to offer and provide radio telecommunications service for hire to subscribers
in aircraft.
B.
"Call-by-call Basis" means any method of charging for telecommunications
services where the price is measured by individual calls.
C.
"Communications Channel" means a physical or virtual path
of communications over which signals are transmitted between or among customer
channel termination points.
D.
"Customer" means the person or entity that contracts with
the seller of telecommunications services. If the end user of telecommunications services is not the contracting
party, the end user of the telecommunications service is the customer of the
telecommunication service, but this sentence only applies for the purpose
of sourcing sales of telecommunications services under Section 314. "Customer"
does not include a reseller of telecommunications service or for mobile telecommunications
service of a serving carrier under an agreement to serve the customer outside
the home service provider's licensed service area.
E.
"Customer Channel Termination Point" means the location
where the customer either inputs or receives the communications.
F.
"End user" means the person who utilizes the telecommunication
service. In the case of an entity,
“end user” means the individual who utilizes the service on behalf
of the entity.
G.
"Home service provider" means the same as that term is
defined in Section 124(5) of Public Law 106-252 (Mobile Telecommunications
Sourcing Act).
H.
"Mobile telecommunications service" means the same as that
term is defined in Section 124(5) of Public Law 106-252 (Mobile Telecommunications
Sourcing Act).
I.
"Place of primary use" means the street address representative
of where the customer's use of the telecommunications service primarily occurs,
which must be the residential street address or the primary business street
address of the customer. In the case
of mobile telecommunications services, "place of primary use" must
be within the licensed service area of the home service provider.
J.
"Post-paid calling service" means the telecommunications
service obtained by making a payment on a call-by-call basis either through
the use of a credit card or payment mechanism such as a bank card, travel
card, credit card, or debit card, or by charge made to which a telephone number
which is not associated with the origination or termination of the telecommunications
service. A post-paid calling service
includes a telecommunications service that would be a prepaid calling service
except it is not exclusively a telecommunication service.
K.
"Prepaid calling service" means the right to access exclusively
telecommunications services, which must be paid for in advance and which enables
the origination of calls using an access number or authorization code, whether
manually or electronically dialed, and that is sold in predetermined units
or dollars of which the number declines with use in a known amount.
L.
"Private communication service" means a telecommunication
service that entitles the customer to exclusive or priority use of a communications
channel or group of channels between or among termination points, regardless
of the manner in which such channel or channels are connected, and includes
switching capacity, extension lines, stations, and any other associated services
that are provided in connection with the use of such channel or channels.
M.
"Service address" means:
1.
The location of the telecommunications equipment to which a customer's
call is charged and from which the call originates or terminates, regardless
of where the call is billed or paid.
2.
If the location in subsection (M)(1) is not known, service address
means the origination point of the signal of the telecommunications services
first identified by either the seller's telecommunications system or in information
received by the seller from its service provider, where the system used to
transport such signals is not that of the seller.
3.
If the location in subsection (M)(1) and subsection (M)(2) are not
known, the service address means the location of the customer's place of primary
use.
Section 316: ENACTMENT OF EXEMPTIONS
A.
A member state may enact a product-based exemption without restriction
if the Agreement does not have a definition for the product or for a term
that includes the product. If the Agreement has a definition for the product
or for a term that includes the product, a member state may exempt all items
included within the definition but shall not exempt only part of the items
included within the definition unless the Agreement sets out the exemption
for part of the items as an acceptable variation.
B.
A member state may enact an entity-based or a use-based exemption
without restriction if the Agreement does not have a definition for the product
whose use or purchase by a specific entity is exempt or for a term that includes
the product. If the Agreement has a definition for the product whose use or
specific purchase is exempt, a member state may enact an entity-based or a
use-based exemption that applies to that product as long as the exemption
utilizes the Agreement definition of the product. If the Agreement does not
have a definition for the product whose use or specific purchase is exempt
but has a definition for a term that includes the product, a member state
may enact an entity-based or a use-based exemption for the product without
restriction.
C.
For purposes of complying with the requirements in this section,
the inclusion of a product within the definition of tangible personal property
is disregarded.
Section 317:
ADMINISTRATION OF EXEMPTIONS
A.
Each member state shall observe the following provisions when a purchaser
claims an exemption:
1.
The seller shall obtain identifying information of the purchaser
and the reason for claiming a tax exemption at the time of the purchase as
determined by the governing board.
2.
A purchaser is not required to provide a signature to claim an exemption
from tax unless a paper exemption certificate is used.
3.
The seller shall use the standard form for claiming an exemption
electronically as adopted by the governing board.
4.
The seller shall obtain the same information for proof of a claimed
exemption regardless of the medium in which the transaction occurred.
5.
A member state may utilize a system wherein the purchaser exempt
from the payment of the tax is issued an identification number that shall
be presented to the seller at the time of the sale.
6.
The seller shall maintain proper records of exempt transactions and
provide them to a member state when requested.
7.
A member state shall administer use-based and entity-based exemptions
when practicable through a direct pay permit, an exemption certificate, or
another means that does not burden sellers.
B.
Each member state shall relieve sellers that follow the requirements
of this section from any tax otherwise applicable if it is determined that
the purchaser improperly claimed an exemption and to hold the purchaser liable
for the nonpayment of tax. This relief from liability does not apply to a
seller who fraudulently fails to collect the tax or solicits purchasers to
participate in the unlawful claim of an exemption.
Section 318:
UNIFORM TAX RETURNS
Each member
state shall:
A.
Require that only one tax return for each taxing period for each
seller be filed for the member state and all the taxing jurisdictions within
the member state.
B.
Require that returns be due no sooner than the twentieth day of the
month following the month in which the transaction occurred.
C.
Allow any Model 1, Model 2, or Model 3 seller to submit its sales
and use tax returns in a simplified format that does not include more data
fields than permitted by the governing board.
A member state may require additional informational returns to be submitted
not more frequently than every six months under a staggered system developed
by the governing board.
D.
Allow any seller that is registered under the Agreement, which does
not have a legal requirement to register in the member state, and is not a
Model 1, 2, or 3 seller, to submit its sales and use tax returns as follows:
1.
Upon registration, a member state shall provide to the seller the
returns required by that state.
2.
A member state may require a seller to file a return anytime within
one year of the month of initial registration, and future returns may be required
on an annual basis in succeeding years.
3.
In addition to the returns required in subsection (D)(2), a member
state may require sellers to submit returns in the month following any month
in which they have accumulated state and local tax funds for the state in
the amount of one thousand dollars or more.
4.
Participate with other member states in developing a more uniform
sales and use tax return that, when completed, would be available to all sellers.
5.
Require, at each member state's discretion, all Model 1, 2, and 3
sellers to file returns electronically. It is the intent of the member states
that all member states have the capability of receiving electronically filed
returns by January 1, 2004.
Section 319:
UNIFORM RULES FOR REMITTANCES OF FUNDS
Each member
state shall:
A.
Require only one remittance for each return except as provided in
this subsection. If any additional remittance is required, it may only be
required from sellers that collect more than thirty thousand dollars in sales
and use taxes in the member state during the preceding calendar year as provided
herein. The amount of the additional remittance shall be determined through
a calculation method rather than actual collections and shall not require
the filing of an additional return.
B.
Require, at each member state's discretion, all remittances from
sellers under Models 1, 2, and 3 to be remitted electronically.
C.
Allow for electronic payments by both ACH Credit and ACH Debit.
D.
Provide an alternative method for making "same day" payments
if an electronic funds transfer fails.
E.
Provide that if a due date falls on a legal banking holiday in a
member state, the taxes are due to that state on the next succeeding business
day.
F.
Require that any data that accompanies a remittance be formatted
using uniform tax type and payment type codes approved by the governing board.
Section 320: UNIFORM RULES FOR RECOVERY OF BAD DEBTS
Each member state shall use the following to provide a deduction
for bad debts to a seller. To the
extent a member state provides a bad debt deduction to any other party, the
same procedures will apply. Each member
state shall:
A.
Allow a deduction from taxable sales for bad debts. Any deduction taken that is attributed to bad
debts shall not include interest.
B.
Utilize the federal definition of “bad debt” in 26 U.S.C.
Sec. 166 as the basis for calculating bad debt recovery. However, the amount
calculated pursuant to 26 U.S.C. Sec. 166 shall be adjusted to exclude: financing
charges or interest; sales or use taxes charged on the purchase price; uncollectable
amounts on property that remain in the possession of the seller until the
full purchase price is paid; expenses incurred in attempting to collect any
debt, and repossessed property.
C.
Allow bad debts to be deducted on the return for the period during
which the bad debt is written off as uncollectable in the claimant’s
books and records and is eligible to be deducted for federal income tax purposes.
For purposes of this subsection, a claimant who is not required to file federal
income tax returns may deduct a bad debt on a return filed for the period
in which the bad debt is written off as uncollectable in the claimant’s
books and records and would be eligible for a bad debt deduction for federal
income tax purposes if the claimant was required to file a federal income
tax return.
D.
Require that, if a deduction is taken for a bad debt and the debt
is subsequently collected in whole or in part, the tax on the amount so collected
must be paid and reported on the return filed for the period in which the
collection is made.
E.
Provide that, when the amount of bad debt exceeds the amount of taxable
sales for the period during which the bad debt is written off, a refund claim
may be filed within the member state’s otherwise applicable statute of
limitations for refund claims; however, the statute of limitations shall be
measured from the due date of the return on which the bad debt could first
be claimed.
F.
Where filing responsibilities have been assumed by a CSP, allow the
service provider to claim, on behalf of the seller, any bad debt allowance
provided by this section. The CSP must credit or refund the full amount of
any bad debt allowance or refund received to the seller.
G.
Provide that, for the purposes of reporting a payment received on
a previously claimed bad debt, any payments made on a debt or account are
applied first proportionally to the taxable price of the property or service
and the sales tax thereon, and secondly to interest, service charges, and
any other charges.
H.
In situations where the books and records of the party claiming the
bad debt allowance support an allocation of the bad debts among the member
states, permit the allocation.
Section 321:
CONFIDENTIALITY AND PRIVACY PROTECTIONS UNDER MODEL 1
A.
The purpose of this section is to set forth the member states' policy
for the protection of the confidentiality rights of all participants in the
system and of the privacy interests of consumers who deal with Model 1 sellers.
B.
As used in this section, the term "confidential taxpayer information"
means all information that is protected under a member state's laws, regulations,
and privileges; the term "personally identifiable information" means
information that identifies a person; and the term "anonymous data"
means information that does not identify a person.
C.
The member states agree that a fundamental precept in Model 1 is
to preserve the privacy of consumers by protecting their anonymity. With very
limited exceptions, a CSP shall perform its tax calculation, remittance, and
reporting functions without retaining the personally identifiable information
of consumers.
D.
The governing board may certify a CSP only if that CSP certifies
that:
1.
Its system has been designed and tested to ensure that the fundamental
precept of anonymity is respected;
2.
That personally identifiable information is only used and retained
to the extent necessary for the administration of Model 1 with respect to
exempt purchasers;
3.
It provides consumers clear and conspicuous notice of its information
practices, including what information it collects, how it collects the information,
how it uses the information, how long, if at all, it retains the information
and whether it discloses the information to member states. Such notice shall be satisfied by a written
privacy policy statement accessible by the public on the official web site
of the CSP;
4.
Its collection, use and retention of personally identifiable information
will be limited to that required by the member states to ensure the validity
of exemptions from taxation that are claimed by reason of a consumer's status
or the intended use of the goods or services purchased; and
5.
It provides adequate technical, physical, and administrative safeguards
so as to protect personally identifiable information from unauthorized access
and disclosure.
E.
Each member state shall provide public notification to consumers,
including their exempt purchasers, of the state’s practices relating
to the collection, use and retention of personally identifiable information.
F.
When any personally identifiable information that has been collected
and retained is no longer required for the purposes set forth in subsection
(D)(4), such information shall no longer be retained by the member states.
G.
When personally identifiable information regarding an individual
is retained by or on behalf of a member state, such state shall provide reasonable
access by such individual to his or her own information in the state's possession
and a right to correct any inaccurately recorded information.
H.
If anyone other than a member state, or a person authorized by that
state’s law or the Agreement, seeks to discover personally identifiable
information, the state from whom the information is sought should make a reasonable
and timely effort to notify the individual of such request.
I.
This privacy policy is subject to enforcement by member states' attorneys
general or other appropriate state government authority.
J.
Each member states' laws and regulations regarding the collection,
use, and maintenance of confidential taxpayer information remain fully applicable
and binding. Without limitation, the Agreement does not enlarge or limit the
member states' authority to:
1.
Conduct audits or other review as provided under the Agreement and
state law.
2.
Provide records pursuant to a member state's Freedom of Information
Act, disclosure laws with governmental agencies, or other regulations.
3.
Prevent, consistent with state law, disclosures of confidential taxpayer
information.
4.
Prevent, consistent with federal law, disclosures or misuse of federal
return information obtained under a disclosure agreement with the Internal
Revenue Service.
5.
Collect, disclose, disseminate, or otherwise use anonymous data for
governmental purposes.
K.
This privacy policy does not preclude the governing board from certifying
a CSP whose privacy policy is more protective of confidential taxpayer information
or personally identifiable information than is required by the Agreement.
Section 322: SALES TAX HOLIDAYS
A.
If a member state allows for temporary exemption periods, commonly
referred to as sales tax holidays, the member state shall:
1.
Not apply an exemption after December 31, 2003, unless the items
to be exempted are specifically defined in the Agreement and the exemptions
are uniformly applied to state and local sales and use taxes.
2.
Provide notice of the exemption period at least sixty days’
prior to the first day of the calendar quarter in which the exemption period
will begin.
B.
A member
state may establish a sales tax holiday that utilizes price thresholds set
by such state and the provisions of the Agreement on the use of thresholds
shall not apply to exemptions provided by a state during a sales tax holiday.
In order to provide uniformity, a price threshold established by a member
state for exempt items shall include only items priced below the threshold.
A member state shall not exempt only a
portion of the price of an individual item during a sales tax holiday.
C.
The governing board shall
establish procedures to provide uniformity for the administrative issues involved
with the implementation of a sales tax holiday. These issues include, but are not limited to:
1.
Treatment of layaway purchases;
2.
Exempt and nonexempt items
that are packaged together;
3.
Treatment of coupons or
discounts;
4.
Splitting of items normally
sold together;
5.
Treatment of rainchecks;
6.
Exchanges;
7.
Shipping and handling charges;
8.
Service charges;
9.
Restocking fees; and
10.
Order date/Back orders.
Section 323: CAPS AND THRESHOLDS
A.
Each member state shall:
1.
Not have caps or thresholds on the application of state sales or
use tax rates or exemptions that are based on the value of the transaction
or item after December 31, 2005. A
member state may continue to have caps and thresholds until that date.
2.
Not have caps that are based on the application of the rates unless
the member state assumes the administrative responsibility in a manner that
places no additional burden on the retailer.
B.
Each member state that has local jurisdictions that levy a sales
or use tax shall not place caps or thresholds on the application of local
rates or use tax rates or exemptions that are based on the value of the transaction
or item after December 31, 2005. A
member state may continue to have caps and thresholds until that date.
C.
The provisions of this section do not apply to sales or use taxes
levied on the retail sale or transfer of motor vehicles, aircraft, watercraft,
modular homes, manufactured homes, or mobile homes or to instances where the
burden of administration has been shifted from the retailer.
Section 324: ROUNDING RULE
A.
After December 31, 2005, each member state shall adopt a rounding
algorithm that meets the following criteria:
1.
Tax computation must be carried to the third decimal place, and
2.
The tax must be rounded to a whole cent using a method that rounds
up to the next cent whenever the third decimal place is greater than four.
B.
Each state shall allow sellers to elect to compute the tax due on
a transaction on an item or an invoice basis, and shall allow the rounding
rule to be applied to the aggregated state and local taxes. No member state shall require a seller to collect
tax based on a bracket system.
Section 325: CUSTOMER REFUND PROCEDURES
A.
These customer refund procedures are provided to apply when a state
allows a purchaser to seek a return of over-collected sales or use taxes from
the seller.
B.
Nothing in this section shall either require a state to provide,
or prevent a state from providing, a procedure by which a purchaser may seek
a refund directly from the state arising out of sales or use taxes collected
in error by a seller from the purchaser.
Nothing in this section shall operate to extend any person's time to
seek a refund of sales or use taxes collected or remitted in error.
C.
These customer refund procedures provide the first course of remedy
available to purchasers seeking a return of over-collected sales or use taxes
from the seller. A cause of action
against the seller for the over-collected sales or use taxes does not accrue
until a purchaser has provided written notice to a seller and the seller has
had sixty days to respond. Such notice
to the seller must contain the information necessary to determine the validity
of the request.
D.
In connection with a purchaser's request from a seller of over-collected
sales or use taxes, a seller shall be presumed to have a reasonable business
practice, if in the collection of such sales or use taxes, the seller: i)
uses either a provider or a system, including a proprietary system, that is
certified by the state; and ii) has remitted to the state all taxes collected
less any deductions, credits, or collection allowances.
Section 326: DIRECT PAY PERMITS
Each member state shall provide for
a direct pay authority that allows the holder of a direct pay permit to purchase
otherwise taxable goods and services without payment of tax to the supplier
at the time of purchase. The holder
of the direct pay permit will make a determination of the taxability and then
report and pay the applicable tax due directly to the tax jurisdiction. Each
state can set its own limits and requirements for the direct pay permit. The governing board shall advise member states
when setting state direct pay limits and requirements, and shall consider
use of the Model Direct Payment Permit Regulation as developed by the Task
Force on EDI Audit and Legal Issues for Tax Administration.
Section 327: LIBRARY OF DEFINITIONS
Each member
state shall utilize common definitions as provided in this section. The terms
defined are set out in the Library of Definitions, in Appendix C of this Agreement.
A member state shall adhere to the following principles:
A.
If a term defined in the Library of Definitions appears in a member
state’s sales and use tax statutes or administrative rules or regulations,
the member state shall enact or adopt the Library definition of the term in
its statutes or administrative rules or regulations in substantially the same
language as the Library definition.
B.
A member state shall not use a Library definition in its sales or
use tax statutes or administrative rules or regulations that is contrary to
the meaning of the Library definition.
C.
Except as specifically provided in Section 314 and the Library of
Definitions, a member state shall impose a sales or use tax on all products
or services included within each definition or exempt from sales or use tax
all products or services within each definition.
Section 328: TAXABILITY MATRIX
A.
To ensure uniform application of terms defined in the Library of
Definitions each member state shall complete a taxability matrix adopted by
the governing board. The member state’s
entries in the matrix shall be provided and maintained in a database that
is in a downloadable format approved by the governing board. A member state shall provide notice of changes
in the taxability of the products or services listed in the taxability matrix
as required by the governing board.
B.
A member state shall relieve sellers and CSPs from liability to the
member state and its local jurisdictions for having charged and collected
the incorrect amount of sales or use tax resulting from the seller or CSP
relying on erroneous data provided by the member state in the taxability matrix.
Section 329: EFFECTIVE DATE FOR RATE CHANGES
Each member state shall provide that the effective date of rate changes
for services covering a period starting before and ending after the statutory
effective date shall be as follows:
A.
For a rate increase, the new rate shall apply to the first billing
period starting on or after the effective date.
B.
For a rate decrease, the new rate shall apply to bills rendered on
or after the effective date.
ARTICLE IV
SELLER REGISTRATION
Section 401: SELLER PARTICIPATION
A.
The member states shall provide an online registration system that
will allow sellers to register in all the member states.
B.
By registering, the seller agrees to collect and remit sales and
use taxes for all taxable sales into the member states, including member states
joining after the seller's registration. Withdrawal or revocation of a member
state shall not relieve a seller of its responsibility to remit taxes previously
or subsequently collected on behalf of the state.
C.
In member states where the seller has a requirement to register prior
to registering under the Agreement, the seller may be required to provide
additional information to complete the registration process or the seller
may choose to register directly with those states.
D.
A member state or a state that has withdrawn or been expelled shall
not use registration with the central registration system and the collection
of sales and use taxes in the member states as a factor in determining whether
the seller has nexus with that state for any tax at any time.
Section 402:
AMNESTY FOR REGISTRATION
A.
Subject to the limitations in this section:
1.
A member state shall provide amnesty for uncollected or unpaid sales
or use tax to a seller who registers to pay or to collect and remit applicable
sales or use tax on sales made to purchasers in the state in accordance with
the terms of the Agreement, provided that the seller was not so registered
in that state in the twelve-month period preceding the effective date of the
state's participation in the Agreement.
2.
The amnesty will preclude assessment for uncollected or unpaid sales
or use tax together with penalty or interest for sales made during the period
the seller was not registered in the state, provided registration occurs within
twelve months of the effective date of the state's participation in the Agreement.
3.
Amnesty similarly shall be provided by any additional state that
joins the Agreement after the seller has registered.
B.
The amnesty is not available to a seller with respect to any matter
or matters for which the seller received notice of the commencement of an
audit and which audit is not yet finally resolved including any related administrative
and judicial processes.
C.
The amnesty is not available for sales or use taxes already paid
or remitted to the state or to taxes collected by the seller.
D.
The amnesty is fully effective, absent the seller's fraud or intentional
misrepresentation of a material fact, as long as the seller continues registration
and continues payment or collection and remittance of applicable sales or
use taxes for a period of at least thirty-six months. Each member state shall
toll its statute of limitations applicable to asserting a tax liability during
this thirty-six month period.
E.
The amnesty is applicable only to sales or use taxes due from a seller
in its capacity as a seller and not to sales or use taxes due from a seller
in its capacity as a buyer.
F.
A member state may allow amnesty on terms and conditions more favorable
to a seller than the terms required by this section.
Section 403:
METHOD OF REMITTANCE
When registering, the seller may select one of the following methods
of remittances or other method allowed by state law to remit the taxes collected:
A.
MODEL 1, wherein a seller selects a CSP as an agent to perform all
the seller's sales or use tax functions, other than the seller's obligation
to remit tax on its own purchases.
B.
MODEL 2, wherein a seller selects a CAS to use which calculates the
amount of tax due on a transaction.
C.
MODEL 3, wherein a seller utilizes its own proprietary automated
sales tax system that has been certified as a CAS.
Section 404:
REGISTRATION BY AN AGENT
A seller may be registered by an agent. Such appointment shall be
in writing and submitted to a member state if requested by the member state.
ARTICLE V
PROVIDER AND SYSTEM
CERTIFICATION
Section 501:
CERTIFICATION OF SERVICE PROVIDERS AND AUTOMATED SYSTEMS
A.
The governing board shall certify automated systems and service providers
to aid in the administration of sale and use tax collections.
B.
The governing board may certify a person as a CSP if the person meets
all of the following requirements:
1.
The person uses a CAS;
2.
The person integrates its CAS with the system of a seller for whom
the person collects tax so that the tax due on a sale is determined at the
time of the sale;
3.
The person agrees to remit the taxes it collects at the time and
in the manner specified by the member states;
4.
The person agrees to file returns on behalf of the sellers for whom
it collects tax;
5.
The person agrees to protect the privacy of tax information it obtains
in accordance with Section 321 of the Agreement; and
6.
The person enters into a contract with the member states and agrees
to comply with the terms of the contract.
C.
The governing board may certify a software program as a CAS if the
governing board determines that the program meets all of the following requirements:
1.
It determines the applicable state and local sales and use tax rate
for a transaction, in accordance with Sections 309 to 315, inclusive;
2.
It determines whether or not an item is exempt from tax;
3.
It determines the amount of tax to be remitted for each taxpayer
for a reporting period;
4.
It can generate reports and returns as required by the governing
board; and
5.
It can meet any other requirement set by the governing board.
D.
The governing board may establish one or more sales tax performance
standards for Model 3 sellers that meet the eligibility criteria set by the
governing board and that developed a proprietary system to determine the amount
of sales and use tax due on transactions.
ARTICLE VI
MONETARY ALLOWANCES FOR NEW TECHNOLOGICAL MODELS FOR SALES TAX COLLECTION
Section 601:
MONETARY ALLOWANCE UNDER MODEL 1
A.
Each member state shall provide a monetary allowance to a CSP in
Model 1 in accordance with the terms of the contract between the governing
board and the CSP. The details of the monetary allowance will be provided
through the contract process. The governing board shall require that such
allowance be funded entirely from money collected in Model 1.
B.
The contract between the governing board and a CSP may base the monetary
allowance to a CSP on one or more of the following:
1.
A base rate that applies to taxable transactions processed by the
CSP.
2.
For a period not to exceed twenty-four months following a voluntary
seller's registration through the Agreement's central registration process,
a percentage of tax revenue generated for a member state by the voluntary
seller for each member state for which the seller does not have a requirement
to register to collect the tax.
Section 602:
MONETARY ALLOWANCE FOR MODEL 2 SELLERS
The member states initially anticipate that they will provide a monetary
allowance to sellers under Model 2 based on the following:
A.
All sellers shall receive a base rate for a period not to exceed
twenty-four months following the commencement of participation by a seller.
The base rate will be set after the base rate has been established for Model
1. This allowance will be in addition to any discount afforded by each member
state at the time.
B.
The member states anticipate a monetary allowance to a Model 2 Seller
based on the following:
1.
For a period not to exceed twenty-four months following a voluntary
seller's registration through the Agreement's central registration process,
a percentage of tax revenue generated for a member state by the voluntary
seller for each member state for which the seller does not have a requirement
to register to collect the tax.
2.
Following the conclusion of the twenty-four month period, a seller
will only be entitled to a vendor discount afforded under each member state's
law at the time the base rate expires.
Section 603: MONETARY ALLOWANCE FOR MODEL 3 SELLERS AND ALL OTHER
SELLERS THAT ARE NOT UNDER MODELS 1 OR 2
The member states anticipate that they will provide a monetary allowance
to sellers under Model 3 and to all other sellers that are not under Models
1 or 2 based on the following:
A.
For a period not to exceed twenty-four months following a voluntary
seller's registration through the Agreement's central registration process,
a percentage of tax revenue generated for a member state by the voluntary
seller for each member state for which the seller does not have a requirement
to register to collect the tax.
B.
Vendor discounts afforded under each member state's law.
ARTICLE
VII
AGREEMENT
ORGANIZATION
Section 701: EFFECTIVE DATE
The Agreement shall become binding and take effect when
at least ten states comprising at least twenty percent of the total population,
as determined by the 2000 Federal census, of all states imposing a state sales
tax have petitioned for membership and have been found to be in compliance
with the requirements of the Agreement pursuant to Section 805. The Agreement shall take effect on the first
day of a calendar quarter at least sixty days after the tenth state is found
in compliance, but cannot take effect prior to July 1, 2003.
Section 702: APPROVAL OF INITIAL STATES
Prior to the effective date
of the Agreement, a state may seek membership by forwarding a petition for
membership and certificate of compliance to the Co-Chairs of the Streamlined
Sales Tax Implementing States. A petitioning
state shall also provide a copy of its petition for membership and certificate
of compliance to each of the Streamlined Sales Tax Implementing States.
A petitioning state shall also post a copy of its petition for membership
and certificate of compliance on that state’s web site.
Upon receipt of the requisite
number of petitions as provided in Section 701, the Co-Chairs shall convene
and preside over a meeting of the petitioning states for the purpose of determining
if the petitioning states are in compliance with the Agreement.
An affirmative vote of three-fourths of the other petitioning states
is necessary for a petitioning state to be found in compliance with the Agreement. A petitioning state shall not vote on its own petition for membership.
The Co-Chairs shall provide
the public with an opportunity to comment prior to any vote on a state’s
petition for membership.
ARTICLE VIII
STATE ENTRY AND WITHDRAWAL
After the
effective date of the Agreement, a state may apply to become a party to the
Agreement by submitting a petition for membership and certificate of compliance
to the governing board. The petition for membership shall include such state’s
proposed date of entry. The petitioning state’s proposed date of entry
shall be on the first day of a calendar quarter. The proposed date of entry
shall be a date on which all provisions necessary for the state to be in compliance
with the Agreement are in place and effective.
The petitioning
state shall provide a copy of its petition for membership and the certificate
of compliance to each member state when the petitioning state submits its
petition for membership to the governing board. A petitioning state shall
also post a copy of its petition for membership and certificate of compliance
on that state’s web site.
The certificate
of compliance shall be signed by the chief executive of the state’s tax
agency. The certificate of compliance shall document compliance with the provisions
of the Agreement and cite applicable statutes, rules, regulations, or other
authorities evidencing such compliance.
Section 803: ANNUAL RE-CERTIFICATION OF MEMBER
STATES
Each member
state shall annually re-certify that such state is in compliance with the
Agreement. Each member state shall
make a re-certification to the governing board on or before August 1 of each
year after the year of the state’s entry.
In its annual re-certification, the state shall include any changes in its statutes, rules, regulations, or
other authorities that could affect its compliance with the terms of
the Agreement. The re-certification
shall be signed by the chief executive of the state’s tax agency.
A member state that cannot re-certify its compliance with
the Agreement shall submit a statement of non-compliance to the governing
board. The statement of non-compliance
shall include any action or decision that takes such state out of compliance
with the Agreement and the steps it will take to return to compliance. The governing board shall promulgate rules
and procedures to respond to statements of noncompliance in accordance with
Section 809.
Each member
state shall post its annual re-certification or statement of non-compliance on that state’s web site.
The governing
board shall determine if a petitioning state is in compliance with the Agreement.
A three-fourths vote of the entire governing board is required to approve
a state’s petition for membership. The
governing board shall provide public notice and opportunity for comment prior
to voting on a state’s petition for membership. A state’s membership
is effective on the proposed date of entry in its petition for membership
or the first day of the calendar quarter after its petition is approved by
the governing board, whichever is later, and is at least sixty days after
its petition is approved.
Section 805: COMPLIANCE
A state
is in compliance with the Agreement if the effect of the state’s laws,
rules, regulations, and policies is substantially compliant with each of the
requirements set forth in the Agreement.
Section 806: AGREEMENT ADMINISTRATION
Authority
to administer the Agreement shall rest with the governing board comprised
of representatives of each member state.
Each member state may appoint up to four representatives to the governing
board. The representatives shall be
members of the executive or legislative branches of the state. Each member
state shall be entitled to one vote on the governing board. Except as otherwise provided in the Agreement,
all actions taken by the governing board shall require an affirmative vote
of a majority of the governing board present and voting. The governing board
shall determine its meeting schedule, but shall meet at least once annually.
The governing board shall provide a public comment period at each meeting
to provide members of the public an opportunity to address the board on matters
relevant to the administration or operation of the Agreement.
The governing board shall provide public notice of its meetings at
least thirty days in advance of such meetings. The governing board shall promulgate
rules establishing the public notice requirements for holding emergency meetings
on less than thirty day’s notice. The governing board may meet electronically.
The governing
board is responsible for the administration and operation of the Agreement,
including the appointment of all manner of committees. The governing board may employ staff, advisors,
consultants or agents. The governing
board may promulgate rules and procedures it deems necessary to carry out
its responsibilities. The governing board may take any action that is necessary
and proper to fulfill the purposes of the Agreement. The governing board may allocate the cost of
administration of the Agreement among the member states.
The governing
board may assign committees certain duties, including, but not limited to:
A.
Responding to questions regarding the administration of the Agreement;
B.
Preparing certification requirements and coordinating the certification
process for CSPs;
C.
Coordinating joint audits;
D.
Issuing requests for proposals;
E.
Coordinating contracts with member states and providers; and
F.
Maintaining records for the governing board.
Section 807: OPEN MEETINGS
Each meeting of the governing board
and the minutes thereof shall be open to the public except as provided herein.
Meetings of the governing board may be closed only for one or more
of the following:
A.
Personnel issues.
B.
Information required by
the laws of any member state to be protected from public disclosure. In the
meeting, the governing board shall excuse any attendee to whom confidential
taxpayer information cannot be disclosed under the law of any member state.
C.
Proprietary information
requested by any business to be protected from disclosure.
D.
The consideration of issues
incident to competitive bidding, requests for information, or certification,
the disclosure of which would defeat the public interest in a fair and competitive
process.
E.
The consideration of pending
litigation in a member state the discussion of which in a public session would,
in the judgment of the member state engaged in the litigation, adversely affect
its interests. In the meeting, the
governing board shall excuse any attendee to whom confidential taxpayer information
cannot be disclosed under the law of any member state.
A closed session of the governing board
may be convened by the chair or by a majority vote of the governing board.
When a closed session is convened, the reason for the closed session
shall be noted in a public session. Any
actions taken in the closed session shall be reported immediately upon the
reconvening of a public session.
With respect
to each member state, the Agreement shall continue in full force and effect
until a member state withdraws its membership or is expelled. A member state’s withdrawal or expulsion
cannot be effective until the first day of a calendar quarter after a minimum
of sixty days’ notice. A member
state shall submit notice of its intent to withdraw from the Agreement to
the governing board and the chief executive of each member state’s tax
agency. The member state shall provide public notice
of its intent to withdraw and post its notice of intent to withdraw on its
web site. The withdrawal by or expulsion
of a state does not affect the validity of the Agreement among other member
states. A state that withdraws or is expelled from the Agreement remains
liable for its share of any financial or contractual obligations that were
incurred by the governing board prior to the effective date of that state's
withdrawal or expulsion. The appropriate
share of any financial or contractual obligation shall be determined by the
state and the governing board in good faith based on the relative benefits
received and burdens incurred by the parties.
Section 809: SANCTION OF MEMBER STATES
If a member
state is found to be out of compliance with the Agreement, the governing board
may consider sanctions against the state. The sanctions that the governing board may impose include expulsion
from the Agreement, or other penalties as determined by the governing board.
The adoption of a resolution to sanction a member state for noncompliance
with the Agreement shall require the affirmative vote of three-fourths of
the entire governing board, excluding the state that is the subject of the
resolution. The member state that is the subject of the resolution shall not
vote on such resolution. Resolutions
seeking sanctions shall be acted upon by the governing board within a reasonable
period of time as set forth in the governing board’s rules. The governing
board shall provide an opportunity for public comment prior to action on a
proposed sanction.
Section
810: STATE AND LOCAL ADVISORY COUNCIL
The governing board shall create a State and Local Government Advisory
Council to advise the governing board on matters pertaining to the administration
of the Agreement. The membership shall
include at least one representative from each state that is a participating
member of the Streamlined Sales Tax Project pursuant to the Operating Rules
of the Project as designated by that state. In addition, the governing board shall appoint
local government officials to the State and Local Government Advisory Council.
The governing board may appoint other state officials as it deems appropriate. Matters pertaining to the administration of
the Agreement shall include, but not be limited to, admission of states into
membership, noncompliance, and interpretations, revisions or additions to
the Agreement. The State and Local Government Advisory Council shall advise
and assist the Business and Taxpayer Advisory Council in the functions noted
in Section 811.
The governing board shall create a Business
and Taxpayer Advisory Council from the private sector to advise the governing
board on matters pertaining to the administration of the Agreement.
These matters shall include, but not be limited to, admission of states
into membership, noncompliance, and interpretations, revisions or additions
to the Agreement. The Business and Taxpayer Advisory Council shall advise
and assist the State and Local Government Advisory Council in the functions
noted in Section 810.
ARTICLE
IX
AMENDMENTS
AND INTERPRETATIONS
Section
901: AMENDMENTS TO AGREEMENT
Amendments to the Agreement may be brought before the governing board
by any member state. The Agreement
may be amended by a three-fourths vote of the entire governing board. The
governing board shall give the Governor and presiding officer of each house
of each member state notice of proposed amendments to the Agreement at least
sixty days prior to consideration. The
governing board shall give public notice of proposed amendments to the Agreement
at least sixty days prior to consideration. The governing board shall provide
an opportunity for public comment prior to action on an amendment to the Agreement.
Section
902: INTERPRETATIONS OF AGREEMENT
Matters involving interpretation of the Agreement
may be brought before the governing board by any member state or by any other
person. All interpretations shall require a three-fourths vote of the entire
governing board. The governing board
shall publish all interpretations issued under this section. Interpretations shall be considered part of
the Agreement and shall have the same effect as the Agreement. The governing board shall act on requests for
interpretation of the Agreement within a reasonable period of time and under
guidelines and procedures as set forth in the governing board’s rules. The governing board may determine that it will
not issue an interpretation. The governing
board shall provide an opportunity for public comment prior to issuing an
interpretation of the Agreement.
Section 903: DEFINITION
REQUESTS
Any member state or any other person may make requests
for additional definitions or for interpretations on how an individual product
or service fits within a definition. Requests
shall be submitted in writing as determined by the governing board.
Such requests shall be referred to the Advisory Council created in
Section 810 or other group under guidelines and procedures as set forth in
the governing board’s rules. The entity to which the request was referred
shall post notice of the request and provide for input from the public and
the member states as directed by the governing board. Within one hundred eighty days after receiving the request, they
shall report to the governing board one of the following recommendations:
A.
That no action be taken on the request;
B.
That a proposed amendment to the Library be
submitted;
C.
That an interpretation request be submitted;
or
D.
That additional time is needed to review the
request.
If either an amendment or an interpretation is recommended,
the entity to which the request was referred shall provide the appropriate
language as required by the governing board. The governing board shall take action on the
recommendation of the entity to which the request was referred at the next
meeting of the governing board pursuant to the notice requirements of Section
806. Action by the governing board
to approve a recommendation for no action shall be considered the final disposition
of the request. Nothing in this paragraph
shall prohibit a state from directly submitting a proposed amendment or an
interpretation request to the governing board pursuant to Section 901 or Section
902.
ARTICLE X
ISSUE RESOLUTION
PROCESS
Section
1001: RULES AND PROCEDURES FOR ISSUE RESOLUTION
The governing board shall promulgate rules creating an issue resolution
process. The rules shall govern the conduct of the process, including the
participation by any petitioner, affected state, and other interested party,
the disposition of a petition to invoke the process, the allocation of costs
for participating in the process, the possible involvement of a neutral third
party or non-binding arbitration, and such further details as the governing
board determines necessary and appropriate.
Section
1002: PETITION FOR RESOLUTION
Any member state or person may petition the governing board to invoke
the issue resolution process to resolve matters of:
A.
Membership of a state under Article VIII;
B.
Matters of compliance under Section 805;
C.
Possibilities of sanctions of a member state under Section 809;
D.
Amendments to the Agreement under Section 901;
E.
Interpretation issues, including differing interpretations among
the member states, under Section 902; or
F.
Other matters at the discretion of the governing board.
Section
1003: FINAL DECISION OF GOVERNING BOARD
The governing board shall consider any recommendations
resulting from the issue resolution process before making its decision, which
decision shall, as with all other matters under the Agreement, be final and
not subject to further review.
Section 1004: LIMITED SCOPE OF THIS ARTICLE
Nothing in this Article shall be
construed to substitute for, stay or extend, limit, expand, or otherwise affect,
in any manner, any right or duty that any person or governmental body has
under the laws of any member state or local government body. This Article is specifically subject to the
terms of Article XI and shall not be construed as taking precedence over Article
XI.
Section 1101:
COOPERATING SOVEREIGNS
This Agreement
is among individual cooperating sovereigns in furtherance of their governmental
functions. The Agreement provides a mechanism among the member states to establish
and maintain a cooperative, simplified system for the application and administration
of sales and use taxes under the duly adopted law of each member state.
Section 1102:
RELATIONSHIP TO STATE LAW
No provision
of the Agreement in whole or part invalidates or amends any provision of the
law of a member state. Adoption of the Agreement by a member state does not
amend or modify any law of the state. Implementation of any condition of the
Agreement in a member state, whether adopted before, at, or after membership
of a state, must be by the action of the member state. All member states remain
subject to Article VIII.
Section 1103:
LIMITED BINDING AND BENEFICIAL EFFECT
A.
This Agreement binds and inures only to the benefit of the member
states. No person, other than a member state, is an intended beneficiary of
this Agreement. Any benefit to a person other than a state is established
by the laws of the member states and not by the terms of this Agreement.
B.
Consistent with subsection (A), no person shall have any cause of
action or defense under the Agreement or by virtue of a member state's approval
of the Agreement. No person may challenge, in any action brought under any
provision of law, any action or inaction by any department, agency, or other
instrumentality of any member state, or any political subdivision of a member
state on the ground that the action or inaction is inconsistent with the Agreement.
C.
No law of a member state, or the application thereof, may be declared
invalid as to any person or circumstance on the ground that the provision
or application is inconsistent with the Agreement.
Section 1104:
FINAL DETERMINATIONS
The determinations pertaining to the Agreement that are made by the
member states are final when rendered and are not subject to any protest,
appeal, or review.
ARTICLE XII
Section 1201: REVIEW OF COSTS AND BENEFITS
The governing
board will review costs and benefits of administration and collection of sales
and use taxes incurred by states and sellers under the existing sales and
use tax laws at the time of adoption of the Agreement and the proposed Streamlined
Sales Tax Agreement.
STREAMLINED SALES AND USE TAX AGREEMENT
PETITION FOR MEMBERSHIP
WHEREAS, it is in the interest of
the private sector and of state and local governments to simplify and modernize
sales and use tax administration;
WHEREAS, such simplification and
modernization will result in a substantial reduction in the costs and complexity
for sellers of personal property and services in conducting their commercial
enterprises;
WHEREAS, such simplification and
modernization will also result in additional voluntary compliance with the
sales and use tax laws;
WHEREAS, such simplification and
modernization of sales and use tax administration is best conducted in cooperation
and coordination with other states; and
WHEREAS, the State of ___________________
levies a sales tax and levies a use tax. “Sales tax” means the tax
levied under (CITE SPECIFIC STATUTE) and “use tax” means the tax
levied under (CITE SPECIFIC STATUTE).
NOW, the undersigned representative
hereby petitions the governing board of the Streamlined Sales and Use Tax
Agreement (or Co-Chairs of the Streamlined Sales Tax Implementing States)
for membership into the Agreement.
________________________________
NAME
________________________________
TITLE
STATE OF ______________________
|
Term |
Placement
in Agreement |
|
Alcoholic beverages |
Appendix C, Part II, within
food and food products category |
|
Agent |
Article II, Section 201 |
|
Air-to-ground radiotelephone
service |
Article III, Section 315 |
|
Call-by-call basis |
Article III, Section 315 |
|
Candy |
Appendix C, Part II, within
food and food products category |
|
Certified automated system |
Article II, Section 202 |
|
Certified service provider |
Article II, Section 203 |
|
Clothing |
Appendix C, Part II, within
clothing category |
|
Clothing accessories or
equipment |
Appendix C, Part II, within
clothing category |
|
Computer |
Appendix C, Part II, within
computer related category |
|
Computer software |
Appendix C, Part II, within
computer related category |
|
Communications channel |
Article III, Section 315 |
|
Confidential taxpayer information |
Article III, Section 321 |
|
Customer |
Article III, Section 315 |
|
Customer channel termination
point |
Article III, Section 315 |
|
Delivered electronically |
Appendix C, Part II, within
computer related category |
|
Delivery charges |
Appendix C, Part I, 1 |
|
Dietary supplement |
Appendix C, Part II, within
food and food products category |
|
Direct mail |
Appendix C, Part I, 2 |
|
Drug |
Appendix C, Part II, within
health care category |
|
Durable medical equipment |
Appendix C, Part II, within
health care category |
|
Electronic |
Appendix C, Library, within
computer related category |
|
End user |
Article III, Section 315 |
|
Entity-based exemption |
Article II, Section 204 |
|
Term |
Placement
in Agreement |
|
Food and food ingredients |
Appendix C, Part II, within
food and food products category |
|
Food sold through vending
machines |
Appendix C, Part II, within
food and food products category |
|
Grooming and hygiene products |
Appendix C, Part II, within
health care category |
|
Home service provider |
Article III, Section 315 |
|
Lease |
Appendix C, Part I, 3 |
|
Load and leave |
Appendix C, Part II, within
computer related category |
|
Mobile telecommunications
service |
Article III, Section 315 |
|
Mobility enhancing equipment |
Appendix C, Part II, within
health care category |
|
Model 1 Seller |
Article II, Section 205 |
|
Model 2 Seller |
Article II, Section 206 |
|
Model 3 Seller |
Article II, Section 207 |
|
Over-the-counter drug |
Appendix C, Part II, within
health care category |
|
Person |
Article II, Section 208 |
|
Place of primary use |
Article III, Section 315 |
|
Post-paid calling service |
Article III, Section 315 |
|
Prepaid calling service |
Article III, Section 315 |
|
Prepared food |
Appendix C, Part II, within
food and food products category |
|
Prescription |
Appendix C, Part II, within
health care category |
|
Prewritten computer software |
Appendix C, Part II, within
computer related category |
|
Private communication service |
Article III, Section 315 |
|
Product-based exemption |
Article II, Section 209 |
|
Prosthetic device |
Appendix C, Part II, within
health care category |
|
Protective equipment |
Appendix C, Part II, within
clothing category |
|
Purchase price |
Appendix C, Part I, 4 |
|
Purchaser |
Article II, Section 210 |
|
Receive and receipt |
Article III, Section 311 |
|
Registered under this agreement |
Article II, Section 211 |
|
Rental |
Appendix C, Part I, 3 |
|
Retail sale |
Appendix C, Part I, 5 |
|
Term |
Placement
in Agreement |
|
Sale at retail |
Appendix C, Part I, 5 |
|
Sales price |
Appendix C, Part I, 6 |
|
Seller |
Article II, Section 212 |
|
Service address |
Article III, Section 315 |
|
Soft drinks |
Appendix C, Part II, within
food and food products category |
|
Sport or recreational equipment |
Appendix C, Part II, within
clothing category |
|
State |
Article II, Section 213 |
|
Tangible personal property |
Appendix C, Part I, 7 |
|
Tobacco |
Appendix C, Part II, within
food and food products category |
|
Transportation equipment |
Article III, Section 310 |
|
Use-based exemption |
Article II, Section 214 |
Part I Administrative definitions including tangible
personal property. Terms included
in this Part are core terms that apply in imposing and administering sales
and use taxes.
Part II Product definitions. Terms included in this Part are used to exempt
items from sales and use taxes or to impose tax on items by narrowing an exemption
that otherwise includes these items.
Part III Reserved for sales tax holiday
definitions.
PART I
Administrative Definitions
1.
“Delivery charges” means charges by the seller
of personal property or services for
preparation and delivery to a location designated by the purchaser of personal
property or services including, but not limited to, transportation, shipping,
postage, handling, crating, and packing.
A
member state may exclude from “delivery charges” the charges for
delivery of “direct mail” if the charges are separately stated on
an invoice or similar billing document given to the purchaser.
2.
“Direct mail”
means printed material delivered or distributed by United States mail or other
delivery service to a mass audience or to addressees on a mailing list provided
by the purchaser or at the direction of the purchaser when the cost of the
items are not billed directly to the recipients. “Direct mail” includes tangible personal property supplied
directly or indirectly by the purchaser to the direct mail seller for inclusion
in the package containing the printed material. “Direct mail” does not include multiple items of printed
material delivered to a single address.
3.
"Lease or rental" means any transfer of possession or control of tangible personal
property for a fixed or indeterminate term for consideration. A lease or rental may include future options
to purchase or extend.
A.
Lease or rental does not include:
1.
A transfer of possession or control of property under a security
agreement or deferred payment plan that requires the transfer of title upon
completion of the required payments;
2.
A transfer or possession or control of property under an agreement
that requires the transfer of title upon completion of required payments and
payment of an option price does not exceed the greater of one hundred dollars
or one percent of the total required payments; or
3.
Providing tangible personal property along with an operator for a
fixed or indeterminate period of time. A
condition of this exclusion is that the operator is necessary for the equipment
to perform as designed. For the purpose
of this subsection, an operator must do more than maintain, inspect, or set-up
the tangible personal property.
B.
Lease or rental does include agreements covering motor vehicles and
trailers where the amount of consideration may be increased or decreased by
reference to the amount realized upon sale or disposition of the property
as defined in 26 USC 7701(h)(1).
C.
This definition shall be used for sales and use tax purposes regardless
if a transaction is characterized as a lease or rental under generally accepted
accounting principles, the Internal Revenue Code, the [state commercial code],
or other provisions of federal, state or local law.
D.
This definition will be applied only prospectively from the date
of adoption and will have no retroactive impact on existing leases or rentals.
This definition shall neither impact any existing sale-leaseback exemption
or exclusions that a state may have, nor preclude a state from adopting a
sale-leaseback exemption or exclusion after the effective date of the Agreement.
4.
“Purchase price” applies to the measure subject
to use tax and has the same meaning as sales price.
5.
“Retail sale or Sale
at retail” means any sale, lease, or rental for any purpose other
than for resale, sublease, or subrent.
6.
“Sales price”
applies to the measure subject to sales tax and means the total amount of
consideration, including cash, credit, property, and services, for which personal
property or services are sold, leased, or rented, valued in money, whether
received in money or otherwise, without any deduction for the following:
A.
The seller's cost of the property sold;
B.
The cost of materials used, labor or service cost, interest, losses,
all costs of transportation to the seller, all taxes imposed on the
seller, and any other expense of
the seller;
C.
Charges by the seller for any services necessary to complete the
sale, other than delivery and installation charges;
D.
Delivery charges;
E.
Installation charges;
F.
The value of exempt personal property given to the purchaser where
taxable and exempt personal property have been bundled together and sold by
the seller as a single product or piece of merchandise; and
G.
Credit for any trade-in, as determined by state law.
States may exclude from “sales
price” the amounts received for charges included in paragraphs (C) through
(G) above, if they are separately stated on the invoice, billing, or similar
document given to the purchaser.
“Sales price” shall
not include:
A.
Discounts, including cash, term, or coupons that are not reimbursed
by a third party that are allowed by a seller and taken by a purchaser on
a sale;
B.
Interest, financing, and carrying charges from credit extended on
the sale of personal property or services, if the amount is separately stated
on the invoice, bill of sale or similar document given to the purchaser; and
C.
Any taxes legally imposed directly on the consumer that are separately
stated on the invoice, bill of sale or similar document given to the purchaser.
7. “Tangible personal property” means personal
property that can be seen, weighed, measured, felt, or touched, or that is
in any other manner perceptible to the senses. “Tangible personal property” includes
electricity, water, gas, steam, and prewritten computer software.
“Clothing” means all human wearing
apparel suitable for general use. The
following list contains examples and is not intended to be an all-inclusive
list.
1.
Aprons, household and shop;
2.
Athletic supporters;
3.
Baby receiving blankets;
4.
Bathing suits and caps;
5.
Beach capes and coats;
6.
Belts and suspenders;
7.
Boots;
8.
Coats and jackets;
9.
Costumes;
10.
Diapers, children and adult, including
disposable diapers;
11.
Ear muffs;
12.
Footlets;
13.
Formal wear;
14.
Garters and garter belts;
15.
Girdles;
16.
Gloves and mittens for general use;
17.
Hats and caps;
18.
Hosiery;
19.
Insoles for shoes;
20.
Lab coats;
21.
Neckties;
22.
Overshoes;
23.
Pantyhose;
24.
Rainwear;
25.
Rubber pants;
26.
Sandals;
27.
Scarves;
28.
Shoes and shoe laces;
29.
Slippers;
30.
Sneakers;
31.
Socks and stockings;
32.
Steel toed shoes;
33.
Underwear;
34.
Uniforms, athletic and non-athletic; and
35.
Wedding apparel.
B.
“Clothing” shall not include:
1.
Belt buckles sold separately;
2.
Costume masks sold separately;
3.
Patches and emblems sold separately;
4.
Sewing equipment and supplies including, but not limited to, knitting
needles, patterns, pins, scissors, sewing machines, sewing needles, tape measures,
and thimbles; and
5.
Sewing materials that become part of “clothing” including,
but not limited to, buttons, fabric, lace, thread, yarn, and zippers.
"Clothing
accessories or equipment" means incidental items worn on the person or in conjunction with
“clothing.” “Clothing
accessories or equipment” are mutually exclusive of and may be taxed
differently than apparel within the definition of “clothing,” “sport
or recreational equipment,” and “protective equipment.”
The following list contains examples and is not intended to be an
all-inclusive list. “Clothing accessories or equipment” shall include:
A.
Briefcases;
B.
Cosmetics;
C.
Hair notions, including, but not limited to, barrettes, hair bows,
and hair nets;
D.
Handbags;
E.
Handkerchiefs;
F.
Jewelry;
G.
Sun glasses, non-prescription;
H.
Umbrellas;
I.
Wallets;
J.
Watches; and
K.
Wigs and hair pieces.
"Protective
equipment" means items for human wear and designed as protection of the wearer
against injury or disease or as protections against damage or injury of other
persons or property but not suitable for general use. “Protective equipment” are mutually
exclusive of and may be taxed differently than apparel within the definition
of “clothing,” “clothing accessories or equipment,” and
“sport or recreational equipment.”
The following list contains examples and is not intended to be an
all-inclusive list. “Protective equipment”
shall include:
A.
Breathing masks;
B.
Clean room apparel and equipment;
C.
Ear and hearing protectors;
D.
Face shields;
E.
Hard hats;
F.
Helmets;
G.
Paint or dust respirators;
H.
Protective gloves;
I.
Safety glasses and goggles;
J.
Safety belts;
K.
Tool belts; and
L.
Welders gloves and masks.
"Sport
or recreational equipment" means items designed for human use and worn in conjunction with
an athletic or recreational activity that are not suitable for general use.
“Sport or recreational equipment” are mutually exclusive
of and may be taxed differently than apparel within the definition of “clothing,”
“clothing accessories or equipment,” and “protective equipment.”
The following list contains examples and is not intended to be an
all-inclusive list. “Sport or recreational equipment” shall include:
A.
Ballet and tap shoes;
B.
Cleated or spiked athletic shoes;
C.
Gloves, including, but not limited to, baseball, bowling, boxing,
hockey, and golf;
D.
Goggles;
E.
Hand and elbow guards;
F.
Life preservers and vests;
G.
Mouth guards;
H.
Roller and ice skates;
I.
Shin guards;
J.
Shoulder pads;
K.
Ski boots;
L.
Waders; and
M.
Wetsuits and fins.
“Computer” means
an electronic device that accepts information in digital or similar form and
manipulates it for a result based on a sequence of instructions.
“Computer
software”
means a set of coded instructions designed to cause a “computer”
or automatic data processing equipment to perform a task.
“Delivered
electronically” means delivered to the purchaser by means other than tangible storage
media.
“Electronic”
means relating to technology having electrical, digital, magnetic, wireless,
optical, electromagnetic, or similar capabilities.
“Load
and leave” means
delivery to the purchaser by use of a tangible storage media where the tangible
storage media is not physically transferred to the purchaser.
“Prewritten
computer software” means “computer software,” including prewritten upgrades,
which is not designed and developed by the author or other creator to the
specifications of a specific purchaser. The combining of two or more “prewritten
computer software” programs or prewritten portions thereof does not cause
the combination to be other than “prewritten computer software.” “Prewritten computer software” includes
software designed and developed by the author or other creator to the specifications
of a specific purchaser when it is sold to a person other than the purchaser.
Where a person modifies or enhances “computer software” of which
the person is not the author or creator, the person shall be deemed to be
the author or creator only of such person’s modifications or enhancements. “Prewritten computer software” or
a prewritten portion thereof that is modified or enhanced to any degree, where
such modification or enhancement is designed and developed to the specifications
of a specific purchaser, remains “prewritten computer software;”
provided, however, that where there is a reasonable, separately stated charge
or an invoice or other statement of the price given to the purchaser for such
modification or enhancement, such modification or enhancement shall not constitute
“prewritten computer software.”
A member state may exempt “prewritten computer software”
“delivered electronically” or by “load and leave.”
“Alcoholic Beverages” means beverages that are suitable for human
consumption and contain one-half of one percent or more of alcohol by volume.
“Candy” means a preparation of sugar, honey, or other natural or artificial
sweeteners in combination with chocolate, fruits, nuts or other ingredients
or flavorings in the form of bars, drops, or pieces. “Candy” shall not include any preparation
containing flour and shall require no refrigeration.
“Dietary
supplement” means any product, other than “tobacco,” intended to supplement
the diet that:
Contains one or more of the following dietary ingredients:
1. A vitamin;
2. A mineral;
3. An herb or other botanical;
4. An amino acid;
5. A dietary substance for use by humans to supplement the diet by increasing the total dietary intake; or
6. A concentrate, metabolite, constituent, extract, or combination of any ingredient described in above; and
Is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such a form, is not represented as conventional food and is not represented for use as a sole item of a meal or of the diet; and
C.
Is required to be labeled as a dietary supplement, identifiable
by the "Supplemental Facts" box found on the label and as required
pursuant to 21 C.F.R § 101.36.
“Food and food ingredients”
means substances, whether in liquid, concentrated, solid, frozen, dried, or
dehydrated form, that are sold for ingestion or chewing by humans and are
consumed for their taste or nutritional value.
“Food and food ingredients” does not include “alcoholic
beverages” or “tobacco.” A
member state may exclude “candy,” “dietary supplements”
and “soft drinks” from this definition, which items are mutually
exclusive of each other.
Notwithstanding the foregoing requirements
of this definition or any other provision of the Agreement, a member state
may maintain its tax treatment of food in a manner that differs from the definitions
provided herein, provided its taxation or exemption of food is based on a
prohibition or requirement of that state’s Constitution that exists on
the effective date of the Agreement.
“Food
sold through vending machines” means food dispensed from a machine
or other mechanical device that accepts payment.
“Prepared
food”
means:
A.
Food sold in a heated state or heated by the seller;
B.
Two or more food ingredients mixed or combined by the seller for
sale as a single item; or
C.
Food sold with eating utensils provided by the seller, including
plates, knives, forks, spoons, glasses, cups, napkins, or straws. A plate
does not include a container or packaging used to transport the food.
“Prepared food”
in B does not include food that is only cut, repackaged, or pasteurized by
the seller, and eggs,
fish, meat, poultry, and foods containing these raw animal foods requiring
cooking by the consumer as recommended by the Food and Drug Administration
in chapter 3, part 401.11 of its Food Code so as to prevent food borne illnesses.
The following items may be
taxed differently than “prepared food” and each other, if sold without
eating utensils provided by the seller, but may not be taxed differently than
the same item when classified under “food and food ingredients.”
1.
Food sold by a seller whose proper primary NAICS classification is
manufacturing in sector 311, except subsector 3118 (bakeries).
2.
Food sold in an unheated state by weight or volume as a single item.
3.
Bakery items, including bread, rolls, buns, biscuits, bagels, croissants,
pastries, donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies,
tortillas.
Substances within “food
and food ingredients” may be taxed differently if sold as “prepared
food.” A state shall tax or exempt from taxation “candy,”
dietary supplements,” and “soft drinks” that are sold as “prepared
food” in the same manner as it treats other substances that are sold
as “prepared food.”
“Soft
drinks”
means non-alcoholic beverages that contain natural
or artificial sweeteners. “Soft
drinks” do not include beverages that contain milk or milk products,
soy, rice or similar milk substitutes, or greater than fifty percent of vegetable
or fruit juice by volume.
“Tobacco” means cigarettes, cigars,
chewing or pipe tobacco, or any other item that contains tobacco.
“Drug”
means a compound, substance
or preparation, and any component of a compound, substance or preparation,
other than “food and food ingredients,” “dietary supplements”
or “alcoholic beverages:”
A.
Recognized in the official United State Pharmacopoeia, official Homeopathic
Pharmacopoeia of the United States, or official National Formulary, and supplement
to any of them; or
B.
Intended for use in the diagnosis, cure, mitigation, treatment, or
prevention of disease; or
C.
Intended to affect the structure or any function of the body.
A member state may independently:
A.
Limit the definition of “drug” to human use (as opposed
to both human and animal use) in the administration of its exemption;
B.
Draft its exemption for “drug” to specifically add insulin
and/or medical oxygen so that no prescription is required, even if a state
requires a prescription under its exemption for drugs;
C.
Determine the taxability of the sales of drugs and prescription drugs
to hospitals and other medical facilities;
D.
Determine the taxability of free samples of drugs; and
E.
Determine the taxability of bundling taxable and nontaxable drug,
if uniform treatment of bundled transactions is not otherwise defined in the
Agreement.
“Durable
medical equipment” means equipment including repair and replacement parts for same,
but does not include “mobility enhancing equipment,” which:
A.
Can withstand repeated use; and
B.
Is primarily and customarily used to serve a medical purpose; and
C.
Generally is not useful to a person in the absence of illness or
injury; and
D.
Is not worn in or on the body.
A member state may limit its exemption to “durable
medical equipment” used for home use only. A member state may limit the
application of this definition by requiring a “prescription,” or
limit an exemption based on Medicare or Medicaid payments or reimbursements.
“Grooming
and hygiene products” are soaps and cleaning solutions, shampoo, toothpaste, mouthwash,
antiperspirants, and sun tan lotions and screens, regardless of whether the
items meet the definition of “over-the-counter-drugs.”
“Mobility
enhancing equipment” means equipment including repair and replacement parts to same,
but does not include “durable medical equipment,” which:
A.
Is primarily and customarily used to provide or increase the ability
to move from one place to another and which is appropriate for use either
in a home or a motor vehicle; and
B.
Is not generally used by persons with normal mobility; and
C.
Does not include any motor vehicle or equipment on a motor vehicle
normally provided by a motor vehicle manufacturer.
A member state may limit the application of
this definition by requiring a “prescription,” or limit an exemption
based on Medicare or Medicaid payments or reimbursements.
“Over-the-counter-drug” means a drug that contains
a label that identifies the product as a drug as required by 21 C.F.R. § 201.66.
A member state may exclude “grooming and hygiene products”
from this definition. The “over-the-counter-drug” label includes:
A.
A “Drug Facts” panel; or
B.
A statement of the “active ingredient(s)” with a list of
those ingredients contained in the compound, substance or preparation.
“Prescription” means an order, formula
or recipe issued in any form of oral, written, electronic, or other means
of transmission by a duly licensed practitioner authorized by the laws of
the member state.
“Prosthetic
device” means
a replacement, corrective, or supportive device including repair and replacement
parts for same worn on or in the body to:
A.
Artificially replace a missing portion of the body;
B.
Prevent or correct physical deformity or malfunction; or
C.
Support a weak or deformed portion of the body.
A member state may exclude any or all of the following from the definition
of “prosthetic device:”
A.
Corrective eyeglasses;
B.
Contact lenses;
C.
Hearing aids; and
D.
Dental prosthesis.
A member state may limit
the application of this definition by requiring a “prescription,”
or limit an exemption based on Medicare or Medicaid payments or reimbursements.
PART III
Reserved for Sales Tax Holiday Definitions