H. R. 4391
One Hundred Sixth Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Monday,
the twenty-fourth day of January, two thousand
An Act
To amend title 4 of the United States Code to establish sourcing requirements
for State and local taxation of mobile telecommunication services.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Mobile Telecommunications
Sourcing Act’’.
SEC. 2. AMENDMENTS TO TITLE 4 OF THE UNITED STATES CODE.
(a) AMENDMENT RELATING TO THE STATES.—Chapter 4 of title
4 of the United States Code is amended by adding at the end
the following:
‘‘§ 116. Rules for determining State and local government
treatment of charges related to mobile tele-
communications services
‘‘(a) APPLICATION OF THIS SECTION THROUGH SECTION 126.—
This section through 126 of this title apply to any tax, charge,
or fee levied by a taxing jurisdiction as a fixed charge for each
customer or measured by gross amounts charged to customers for
mobile telecommunications services, regardless of whether such
tax, charge, or fee is imposed on the vendor or customer of the
service and regardless of the terminology used to describe the
tax, charge, or fee.
‘‘(b) GENERAL EXCEPTIONS.—This section through 126 of this
title do not apply to—
‘‘(1) any tax, charge, or fee levied upon or measured by
the net income, capital stock, net worth, or property value
of the provider of mobile telecommunications service;
‘‘(2) any tax, charge, or fee that is applied to an equitably
apportioned amount that is not determined on a transactional
basis;
‘‘(3) any tax, charge, or fee that represents compensation
for a mobile telecommunications service provider’s use of public
rights of way or other public property, provided that such
tax, charge, or fee is not levied by the taxing jurisdiction
as a fixed charge for each customer or measured by gross
amounts charged to customers for mobile telecommunication
services;
‘‘(4) any generally applicable business and occupation tax
that is imposed by a State, is applied to gross receipts or
gross proceeds, is the legal liability of the home service provider,
and that statutorily allows the home service provider to elect
H. R. 4391—2
to use the sourcing method required in this section through
126 of this title;
‘‘(5) any fee related to obligations under section 254 of
the Communications Act of 1934; or
‘‘(6) any tax, charge, or fee imposed by the Federal Commu-
nications Commission.
‘‘(c) SPECIFIC EXCEPTIONS.—This section through 126 of this
title—
‘‘(1) do not apply to the determination of the taxing situs
of prepaid telephone calling services;
‘‘(2) do not affect the taxability of either the initial sale
of mobile telecommunications services or subsequent resale of
such services, whether as sales of such services alone or as
a part of a bundled product, if the Internet Tax Freedom
Act would preclude a taxing jurisdiction from subjecting the
charges of the sale of such services to a tax, charge, or fee,
but this section provides no evidence of the intent of Congress
with respect to the applicability of the Internet Tax Freedom
Act to such charges; and
‘‘(3) do not apply to the determination of the taxing situs
of air-ground radiotelephone service as defined in section 22.99
of title 47 of the Code of Federal Regulations as in effect
on June 1, 1999.
‘‘§ 117. Sourcing rules
‘‘(a) TREATMENT
OF
CHARGES
FOR
MOBILE
TELECOMMUNI-
CATIONS SERVICES.—Notwithstanding the law of any State or polit-
ical subdivision of any State, mobile telecommunications services
provided in a taxing jurisdiction to a customer, the charges for
which are billed by or for the customer’s home service provider,
shall be deemed to be provided by the customer’s home service
provider.
‘‘(b) JURISDICTION.—All charges for mobile telecommunications
services that are deemed to be provided by the customer’s home
service provider under sections 116 through 126 of this title are
authorized to be subjected to tax, charge, or fee by the taxing
jurisdictions whose territorial limits encompass the customer’s place
of primary use, regardless of where the mobile telecommunication
services originate, terminate, or pass through, and no other taxing
jurisdiction may impose taxes, charges, or fees on charges for such
mobile telecommunications services.
‘‘§ 118. Limitations
‘‘Sections 116 through 126 of this title do not—
‘‘(1) provide authority to a taxing jurisdiction to impose
a tax, charge, or fee that the laws of such jurisdiction do
not authorize such jurisdiction to impose; or
‘‘(2) modify, impair, supersede, or authorize the modifica-
tion, impairment, or supersession of the law of any taxing
jurisdiction pertaining to taxation except as expressly provided
in sections 116 through 126 of this title.
‘‘§ 119. Electronic databases for nationwide standard numeric
jurisdictional codes
‘‘(a) ELECTRONIC DATABASE.—
‘‘(1) PROVISION
OF
DATABASE.—A State may provide an
electronic database to a home service provider or, if a State
H. R. 4391—3
does not provide such an electronic database to home service
providers, then the designated database provider may provide
an electronic database to a home service provider.
‘‘(2) FORMAT.—(A) Such electronic database, whether pro-
vided by the State or the designated database provider, shall
be provided in a format approved by the American National
Standards Institute’s Accredited Standards Committee X12,
that, allowing for de minimis deviations, designates for each
street address in the State, including to the extent practicable,
any multiple postal street addresses applicable to one street
location, the appropriate taxing jurisdictions, and the appro-
priate code for each taxing jurisdiction, for each level of taxing
jurisdiction, identified by one nationwide standard numeric
code.
‘‘(B) Such electronic database shall also provide the appro-
priate code for each street address with respect to political
subdivisions which are not taxing jurisdictions when reasonably
needed to determine the proper taxing jurisdiction.
‘‘(C) The nationwide standard numeric codes shall contain
the same number of numeric digits with each digit or combina-
tion of digits referring to the same level of taxing jurisdiction
throughout the United States using a format similar to FIPS
55–3 or other appropriate standard approved by the Federation
of Tax Administrators and the Multistate Tax Commission,
or their successors. Each address shall be provided in standard
postal format.
‘‘(b) NOTICE; UPDATES.—A State or designated database pro-
vider that provides or maintains an electronic database described
in subsection (a) shall provide notice of the availability of the
then current electronic database, and any subsequent revisions
thereof, by publication in the manner normally employed for the
publication of informational tax, charge, or fee notices to taxpayers
in such State.
‘‘(c) USER HELD HARMLESS.—A home service provider using
the data contained in an electronic database described in subsection
(a) shall be held harmless from any tax, charge, or fee liability
that otherwise would be due solely as a result of any error or
omission in such database provided by a State or designated data-
base provider. The home service provider shall reflect changes made
to such database during a calendar quarter not later than 30
days after the end of such calendar quarter for each State that
issues notice of the availability of an electronic database reflecting
such changes under subsection (b).
‘‘§ 120. Procedure if no electronic database provided
‘‘(a) SAFE HARBOR.—If neither a State nor designated database
provider provides an electronic database under section 119, a home
service provider shall be held harmless from any tax, charge, or
fee liability in such State that otherwise would be due solely as
a result of an assignment of a street address to an incorrect taxing
jurisdiction if, subject to section 121, the home service provider
employs an enhanced zip code to assign each street address to
a specific taxing jurisdiction for each level of taxing jurisdiction
and exercises due diligence at each level of taxing jurisdiction
to ensure that each such street address is assigned to the correct
taxing jurisdiction. If an enhanced zip code overlaps boundaries
of taxing jurisdictions of the same level, the home service provider
H. R. 4391—4
must designate one specific jurisdiction within such enhanced zip
code for use in taxing the activity for such enhanced zip code
for each level of taxing jurisdiction. Any enhanced zip code assign-
ment changed in accordance with section 121 is deemed to be
in compliance with this section. For purposes of this section, there
is a rebuttable presumption that a home service provider has exer-
cised due diligence if such home service provider demonstrates
that it has—
‘‘(1) expended reasonable resources to implement and main-
tain an appropriately detailed electronic database of street
address assignments to taxing jurisdictions;
‘‘(2) implemented and maintained reasonable internal con-
trols to promptly correct misassignments of street addresses
to taxing jurisdictions; and
‘‘(3) used all reasonably obtainable and usable data per-
taining to municipal annexations, incorporations, reorganiza-
tions and any other changes in jurisdictional boundaries that
materially affect the accuracy of such database.
‘‘(b) TERMINATION
OF SAFE HARBOR.—Subsection (a) applies
to a home service provider that is in compliance with the require-
ments of subsection (a), with respect to a State for which an
electronic database is not provided under section 119 until the
later of—
‘‘(1) 18 months after the nationwide standard numeric code
described in section 119(a) has been approved by the Federation
of Tax Administrators and the Multistate Tax Commission;
or
‘‘(2) 6 months after such State or a designated database
provider in such State provides such database as prescribed
in section 119(a).
‘‘§ 121. Correction of erroneous data for place of primary
use
‘‘(a) IN GENERAL.—A taxing jurisdiction, or a State on behalf
of any taxing jurisdiction or taxing jurisdictions within such State,
may—
‘‘(1) determine that the address used for purposes of deter-
mining the taxing jurisdictions to which taxes, charges, or
fees for mobile telecommunications services are remitted does
not meet the definition of place of primary use in section
124(8) and give binding notice to the home service provider
to change the place of primary use on a prospective basis
from the date of notice of determination if—
‘‘(A) if the taxing jurisdiction making such determina-
tion is not a State, such taxing jurisdiction obtains the
consent of all affected taxing jurisdictions within the State
before giving such notice of determination; and
‘‘(B) before the taxing jurisdiction gives such notice
of determination, the customer is given an opportunity
to demonstrate in accordance with applicable State or local
tax, charge, or fee administrative procedures that the
address is the customer’s place of primary use;
‘‘(2) determine that the assignment of a taxing jurisdiction
by a home service provider under section 120 does not reflect
the correct taxing jurisdiction and give binding notice to the
home service provider to change the assignment on a prospec-
tive basis from the date of notice of determination if—
H. R. 4391—5
‘‘(A) if the taxing jurisdiction making such determina-
tion is not a State, such taxing jurisdiction obtains the
consent of all affected taxing jurisdictions within the State
before giving such notice of determination; and
‘‘(B) the home service provider is given an opportunity
to demonstrate in accordance with applicable State or local
tax, charge, or fee administrative procedures that the
assignment reflects the correct taxing jurisdiction.
‘‘§ 122. Determination of place of primary use
‘‘(a) PLACE OF PRIMARY USE.—A home service provider shall
be responsible for obtaining and maintaining the customer’s place
of primary use (as defined in section 124). Subject to section 121,
and if the home service provider’s reliance on information provided
by its customer is in good faith, a taxing jurisdiction shall—
‘‘(1) allow a home service provider to rely on the applicable
residential or business street address supplied by the home
service provider’s customer; and
‘‘(2) not hold a home service provider liable for any addi-
tional taxes, charges, or fees based on a different determination
of the place of primary use for taxes, charges, or fees that
are customarily passed on to the customer as a separate
itemized charge.
‘‘(b) ADDRESS UNDER EXISTING AGREEMENTS.—Except as pro-
vided in section 121, a taxing jurisdiction shall allow a home service
provider to treat the address used by the home service provider
for tax purposes for any customer under a service contract or
agreement in effect 2 years after the date of the enactment of
the Mobile Telecommunications Sourcing Act as that customer’s
place of primary use for the remaining term of such service contract
or agreement, excluding any extension or renewal of such service
contract or agreement, for purposes of determining the taxing juris-
dictions to which taxes, charges, or fees on charges for mobile
telecommunications services are remitted.
‘‘§ 123. Scope; special rules
‘‘(a) ACT DOES NOT SUPERSEDE CUSTOMER’S LIABILITY
TO
TAXING JURISDICTION.—Nothing in sections 116 through 126 modi-
fies, impairs, supersedes, or authorizes the modification, impair-
ment, or supersession of, any law allowing a taxing jurisdiction
to collect a tax, charge, or fee from a customer that has failed
to provide its place of primary use.
‘‘(b) ADDITIONAL TAXABLE CHARGES.—If a taxing jurisdiction
does not otherwise subject charges for mobile telecommunications
services to taxation and if these charges are aggregated with and
not separately stated from charges that are subject to taxation,
then the charges for nontaxable mobile telecommunications services
may be subject to taxation unless the home service provider can
reasonably identify charges not subject to such tax, charge, or
fee from its books and records that are kept in the regular course
of business.
‘‘(c) NONTAXABLE CHARGES.—If a taxing jurisdiction does not
subject charges for mobile telecommunications services to taxation,
a customer may not rely upon the nontaxability of charges for
mobile telecommunications services unless the customer’s home
service provider separately states the charges for nontaxable mobile
telecommunications services from taxable charges or the home
H. R. 4391—6
service provider elects, after receiving a written request from the
customer in the form required by the provider, to provide verifiable
data based upon the home service provider’s books and records
that are kept in the regular course of business that reasonably
identifies the nontaxable charges.
‘‘§ 124. Definitions
‘‘In sections 116 through 126 of this title:
‘‘(1) CHARGES
FOR
MOBILE
TELECOMMUNICATIONS
SERV-
ICES.—The term ‘charges for mobile telecommunications serv-
ices’ means any charge for, or associated with, the provision
of commercial mobile radio service, as defined in section 20.3
of title 47 of the Code of Federal Regulations as in effect
on June 1, 1999, or any charge for, or associated with, a
service provided as an adjunct to a commercial mobile radio
service, that is billed to the customer by or for the customer’s
home service provider regardless of whether individual trans-
missions originate or terminate within the licensed service area
of the home service provider.
‘‘(2) CUSTOMER.—
‘‘(A) IN GENERAL.—The term ‘customer’ means—
‘‘(i) the person or entity that contracts with the
home service provider for mobile telecommunications
services; or
‘‘(ii) if the end user of mobile telecommunications
services is not the contracting party, the end user
of the mobile telecommunications service, but this
clause applies only for the purpose of determining the
place of primary use.
‘‘(B) The term ‘customer’ does not include—
‘‘(i) a reseller of mobile telecommunications service;
or
‘‘(ii) a serving carrier under an arrangement to
serve the customer outside the home service provider’s
licensed service area.
‘‘(3) DESIGNATED
DATABASE
PROVIDER.—The term ‘des-
ignated database provider’ means a corporation, association,
or other entity representing all the political subdivisions of
a State that is—
‘‘(A) responsible for providing an electronic database
prescribed in section 119(a) if the State has not provided
such electronic database; and
‘‘(B) approved by municipal and county associations
or leagues of the State whose responsibility it would other-
wise be to provide such database prescribed by sections
116 through 126 of this title.
‘‘(4) ENHANCED ZIP CODE.—The term ‘enhanced zip code’
means a United States postal zip code of 9 or more digits.
‘‘(5) HOME SERVICE PROVIDER.—The term ‘home service pro-
vider’ means the facilities-based carrier or reseller with which
the customer contracts for the provision of mobile telecommuni-
cations services.
‘‘(6) LICENSED SERVICE AREA.—The term ‘licensed service
area’ means the geographic area in which the home service
provider is authorized by law or contract to provide commercial
mobile radio service to the customer.
H. R. 4391—7
‘‘(7) MOBILE
TELECOMMUNICATIONS
SERVICE.—The term
‘mobile telecommunications service’ means commercial mobile
radio service, as defined in section 20.3 of title 47 of the
Code of Federal Regulations as in effect on June 1, 1999.
‘‘(8) PLACE OF PRIMARY USE.—The term ‘place of primary
use’ means the street address representative of where the cus-
tomer’s use of the mobile telecommunications service primarily
occurs, which must be—
‘‘(A) the residential street address or the primary busi-
ness street address of the customer; and
‘‘(B) within the licensed service area of the home service
provider.
‘‘(9) PREPAID
TELEPHONE
CALLING
SERVICES.—The term
‘prepaid telephone calling service’ means the right to purchase
exclusively telecommunications services that must be paid for
in advance, that enables the origination of calls using an access
number, authorization code, or both, whether manually or elec-
tronically dialed, if the remaining amount of units of service
that have been prepaid is known by the provider of the prepaid
service on a continuous basis.
‘‘(10) RESELLER.—The term ‘reseller’—
‘‘(A) means a provider who purchases telecommuni-
cations services from another telecommunications service
provider and then resells, uses as a component part of,
or integrates the purchased services into a mobile tele-
communications service; and
‘‘(B) does not include a serving carrier with which
a home service provider arranges for the services to its
customers outside the home service provider’s licensed
service area.
‘‘(11) SERVING CARRIER.—The term ‘serving carrier’ means
a facilities-based carrier providing mobile telecommunications
service to a customer outside a home service provider’s or
reseller’s licensed service area.
‘‘(12) TAXING JURISDICTION.—The term ‘taxing jurisdiction’
means any of the several States, the District of Columbia,
or any territory or possession of the United States, any munici-
pality, city, county, township, parish, transportation district,
or assessment jurisdiction, or any other political subdivision
within the territorial limits of the United States with the
authority to impose a tax, charge, or fee.
‘‘§ 125. Nonseverability
‘‘If a court of competent jurisdiction enters a final judgment
on the merits that—
‘‘(1) is based on Federal law;
‘‘(2) is no longer subject to appeal; and
‘‘(3) substantially limits or impairs the essential elements
of sections 116 through 126 of this title,
then sections 116 through 126 of this title are invalid and have
no legal effect as of the date of entry of such judgment.
‘‘§ 126. No inference
‘‘(a) INTERNET TAX FREEDOM ACT.—Nothing in sections 116
through this section of this title shall be construed as bearing
on Congressional intent in enacting the Internet Tax Freedom
Act or to modify or supersede the operation of such Act.
H. R. 4391—8
‘‘(b) TELECOMMUNICATIONS ACT OF 1996.—Nothing in sections
116 through this section of this title shall limit or otherwise affect
the implementation of the Telecommunications Act of 1996 or the
amendments made by such Act.’’.
(b) TECHNICAL AMENDMENT.—The table of sections of chapter
4 of title 4, United States Code, is amended by adding the following
after the item relating to section 115:
‘‘116. Rules for determining State and local government treatment of charges
related to mobile telecommunications services.
‘‘117. Sourcing rules.
‘‘118. Limitations.
‘‘119. Electronic databases for nationwide standard numeric jurisdictional codes.
‘‘120. Procedure if no electronic database provided.
‘‘121. Correction of erroneous data for place of primary use.
‘‘122. Determination of place of primary use.
‘‘123. Scope; special rules.
‘‘124. Definitions.
‘‘125. Nonseverability.
‘‘126. No inference.’’.
SEC. 3. EFFECTIVE DATE; APPLICATION OF AMENDMENT.
(a) EFFECTIVE DATE.—Except as provided in subsection (b),
this Act and the amendment made by this Act shall take effect
on the date of the enactment of this Act.
(b) APPLICATION OF ACT.—The amendment made by this Act
shall apply only to customer bills issued after the first day of
the first month beginning more than 2 years after the date of
the enactment of this Act.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.