IB
Union Calendar No. 403
106TH CONGRESS
2D SESSION
H. R. 4391
[Report No. 106–719]
To amend title 4 of the United States Code to establish nexus requirements
for State and local taxation of mobile telecommunication services.
IN THE HOUSE OF REPRESENTATIVES
MAY 4, 2000
Mr. HYDE (for himself, Mr. CONYERS, Mr. GEKAS, and Mr. NADLER) intro-
duced the following bill; which was referred to the Committee on the Ju-
diciary
JULY 10, 2000
Reported with amendments, committed to the Committee of the Whole House
on the State of the Union, and ordered to be printed
JULY 10, 2000
Additional sponsor: Mr. GOODLATTE
[Strike out all after the enacting clause and insert the part printed in italic]
[For text of introduced bill, see copy of bill as introduced on May 4, 2000]
A BILL
To amend title 4 of the United States Code to establish
nexus requirements for State and local taxation of mobile
telecommunication services.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Mobile Telecommuni-
cations Sourcing Act’’.
SEC. 2. AMENDMENTS TO TITLE 4 OF THE UNITED STATES
CODE.
(a) AMENDMENT RELATING TO THE STATES.—Chap-
ter 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 govern-
ment treatment of charges related to mo-
bile telecommunications services
‘‘(a) APPLICATION OF THIS SECTION THROUGH SEC-
TION 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 telecommuni-
cations 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 meas-
ured by the net income, capital stock, net worth, or
property value of the provider of mobile telecommuni-
cations 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 com-
pensation 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 occu-
pation 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 al-
lows the home service provider to elect to use the
sourcing method required in this section through 126
of this title;
‘‘(5) any fee related to obligations under section
254 of the Communications Act of 1934; or
‘‘(6) any tax, charge, or fee imposed by the Fed-
eral Communications Commission.
‘‘(c) SPECIFIC EXCEPTIONS.—This section through 126
of this title —
‘‘(1) do not apply to the determination of the
taxing situs of prepaid telephone calling services;
‘‘(2) do not affect the taxability of either the ini-
tial sale of mobile telecommunications services or sub-
sequent 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 tax-
ing jurisdiction from subjecting the charges of the sale
of such services to a tax, charge, or fee, but this sec-
tion 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 Fed-
eral Regulations as in effect on June 1, 1999.
‘‘§ 117. Sourcing rules
‘‘(a) TREATMENT OF CHARGES FOR MOBILE TELE-
COMMUNICATIONS SERVICES.—Notwithstanding the law of
any State or political subdivision of any State, mobile tele-
communications 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 tele-
communications 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 terri-
torial 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 ju-
risdiction do not authorize such jurisdiction to im-
pose; or
‘‘(2) modify, impair, supersede, or authorize the
modification, impairment, or supersession of the law
of any taxing jurisdiction pertaining to taxation ex-
cept 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 pro-
vider or, if a State does not provide such an elec-
tronic database to home service providers, then the
designated database provider may provide an elec-
tronic database to a home service provider.
‘‘(2) FORMAT.—(A) Such electronic database,
whether provided by the State or the designated data-
base provider, shall be provided in a format approved
by the American National Standards Institute’s Ac-
credited Standards Committee X12, that, allowing for
de minimis deviations, designates for each street ad-
dress in the State, including to the extent practicable,
any multiple postal street addresses applicable to one
street location, the appropriate taxing jurisdictions,
and the appropriate code for each taxing jurisdiction,
for each level of taxing jurisdiction, identified by one
nationwide standard numeric code.
‘‘(B) Such electronic database shall also provide
the appropriate code for each street address with re-
spect to political subdivisions which are not taxing
jurisdictions when reasonably needed to determine the
proper taxing jurisdiction.
‘‘(C) The nationwide standard numeric codes
shall contain the same number of numeric digits with
each digit or combination of digits referring to the
same level of taxing jurisdiction throughout the
United States using a format similar to FIPS 55–3
or other appropriate standard approved by the Fed-
eration 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 data-
base provider that provides or maintains an electronic
database described in subsection (a) shall provide notice of
the availability of the then current electronic database, and
any subsequent revisions thereof, by publication in the man-
ner normally employed for the publication of informational
tax, charge, or fee notices to taxpayers in such State.
‘‘(c) USER HELD HARMLESS.—A home service pro-
vider 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 sole-
ly as a result of any error or omission in such database
provided by a State or designated database provider. The
home service provider shall reflect changes made to such
database during a calendar quarter not later than 30 days
after the end of such calendar quarter for each State that
issues notice of the availability of an electronic database
reflecting such changes under subsection (b).
‘‘§ 120. Procedure if no electronic database provided
‘‘(a) SAFE HARBOR.—If neither a State nor des-
ignated 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 assign-
ment 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 spe-
cific taxing jurisdiction for each level of taxing jurisdiction
and exercises due diligence at each level of taxing jurisdic-
tion to ensure that each such street address is assigned to
the correct taxing jurisdiction. If an enhanced zip code over-
laps boundaries of taxing jurisdictions of the same level,
the home service provider must designate one specific juris-
diction within such enhanced zip code for use in taxing the
activity for such enhanced zip code for each level of taxing
jurisdiction. Any enhanced zip code assignment changed in
accordance with section 121 is deemed to be in compliance
with this section. For purposes of this section, there is a
rebuttable presumption that a home service provider has ex-
ercised due diligence if such home service provider dem-
onstrates that it has—
‘‘(1) expended reasonable resources to implement
and maintain an appropriately detailed electronic
database of street address assignments to taxing juris-
dictions;
‘‘(2) implemented and maintained reasonable in-
ternal controls to promptly correct misassignments of
street addresses to taxing jurisdictions; and
‘‘(3) used all reasonably obtainable and usable
data 
pertaining 
to 
municipal 
annexations,
incorporations, 
reorganizations 
and 
any 
other
changes in jurisdictional boundaries that materially
affect the accuracy of such database.
‘‘(b) TERMINATION OF SAFE HARBOR.—Subsection (a)
applies to a home service provider that is in compliance
with the requirements of subsection (a), with respect to a
State for which an electronic database is not provided under
section 119 until the later of—
‘‘(1) 18 months after the nationwide standard
numeric code described in section 119(a) has been ap-
proved 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 data-
base as prescribed in section 119(a).
‘‘§ 121. Correction of erroneous data for place of pri-
mary use
‘‘(a) IN GENERAL.—A taxing jurisdiction, or a State
on behalf of any taxing jurisdiction or taxing jurisdictions
within such State, may—
‘‘(1) determine that the address used for purposes
of determining the taxing jurisdictions to which taxes,
charges, or fees for mobile telecommunications services
are remitted does not meet the definition of place of
primary use in section 124(8) and give binding no-
tice to the home service provider to change the place
of primary use on a prospective basis from the date
of notice of determination if—
‘‘(A) if the taxing jurisdiction making such
determination is not a State, such taxing juris-
diction 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 accord-
ance with applicable State or local tax, charge,
or fee administrative procedures that the address
is the customer’s place of primary use;
‘‘(2) determine that the assignment of a taxing
jurisdiction by a home service provider under section
120 does not reflect the correct taxing jurisdiction and
give binding notice to the home service provider to
change the assignment on a prospective basis from the
date of notice of determination if—
‘‘(A) if the taxing jurisdiction making such
determination is not a State, such taxing juris-
diction 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 ad-
ministrative procedures that the assignment re-
flects the correct taxing jurisdiction.
‘‘§ 122. Determination of place of primary use
‘‘(a) PLACE OF PRIMARY USE.—A home service pro-
vider 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 pro-
vider’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 sup-
plied by the home service provider’s customer; and
‘‘(2) not hold a home service provider liable for
any additional taxes, charges, or fees based on a dif-
ferent 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.—Ex-
cept as provided in section 121, a taxing jurisdiction shall
allow a home service provider to treat the address used by
the home service provider for tax purposes for any customer
under a service contract or agreement in effect 2 years after
the date of 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 mo-
bile telecommunications services are remitted.
‘‘§ 123. Scope; special rules
‘‘(a) ACT DOES NOT SUPERSEDE CUSTOMER’S LIABIL-
ITY TO TAXING JURISDICTION.—Nothing in sections 116
through 126 modifies, impairs, supersedes, or authorizes the
modification, impairment, or supersession of, any law al-
lowing a taxing jurisdiction to collect a tax, charge, or fee
from a customer that has failed to provide its place of pri-
mary use.
‘‘(b) ADDITIONAL TAXABLE CHARGES.—If a taxing ju-
risdiction does not otherwise subject charges for mobile tele-
communications 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 tax-
ation unless the home service provider can reasonably iden-
tify charges not subject to such tax, charge, or fee from its
books and records that are kept in the regular course of busi-
ness.
‘‘(c) NONTAXABLE CHARGES.—If a taxing jurisdiction
does not subject charges for mobile telecommunications serv-
ices to taxation, a customer may not rely upon the nontax-
ability of charges for mobile telecommunications services
unless the customer’s home service provider separately states
the charges for nontaxable mobile telecommunications serv-
ices from taxable charges or the home service provider elects,
after receiving a written request from the customer in the
form required by the provider, to provide verifiable data
based upon the home service provider’s books and records
that are kept in the regular course of business that reason-
ably identifies the nontaxable charges.
‘‘§ 124. Definitions
‘‘In sections 116 through 126 of this title:
‘‘(1) CHARGES
FOR
MOBILE
TELECOMMUNI-
CATIONS
SERVICES.—The term ‘charges for mobile
telecommunications services’ means any charge for, or
associated with, the provision of commercial mobile
radio service, as defined in section 20.3 of title 47 of
the Code of Federal Regulations as in effect on June
1, 1999, or any charge for, or associated with, a serv-
ice provided as an adjunct to a commercial mobile
radio service, that is billed to the customer by or for
the customer’s home service provider regardless of
whether individual transmissions originate or termi-
nate within the licensed service area of the home serv-
ice 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 tele-
communications services is not the con-
tracting 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 telecommuni-
cations service; or
‘‘(ii) a serving carrier under an ar-
rangement to serve the customer outside the
home service provider’s licensed service
area.
‘‘(3) DESIGNATED
DATABASE
PROVIDER.—The
term ‘designated database provider’ means a corpora-
tion, 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 as-
sociations or leagues of the State whose responsi-
bility it would otherwise be to provide such data-
base prescribed by sections 116 through 126 of
this title.
‘‘(4) ENHANCED ZIP CODE.—The term ‘enhanced
zip code’ means a United States postal zip code of 9
or more digits.
‘‘(5) HOME
SERVICE
PROVIDER.—The term
‘home service provider’ means the facilities-based car-
rier or reseller with which the customer contracts for
the provision of mobile telecommunications services.
‘‘(6) LICENSED SERVICE AREA.—The term ‘li-
censed service area’ means the geographic area in
which the home service provider is authorized by law
or contract to provide commercial mobile radio serv-
ice to the customer.
‘‘(7) MOBILE TELECOMMUNICATIONS SERVICE.—
The term ‘mobile telecommunications service’ means
commercial mobile radio service, as defined in section
20.3 of title 47 of the Code of Federal Regulations as
in effect on June 1, 1999.
‘‘(8) PLACE OF PRIMARY USE.—The term ‘place
of primary use’ means the street address representa-
tive of where the customer’s use of the mobile tele-
communications service primarily occurs, which must
be—
‘‘(A) the residential street address or the
primary business street address of the customer;
and
‘‘(B) within the licensed service area of the
home service provider.
‘‘(9) PREPAID TELEPHONE CALLING SERVICES.—
The term ‘prepaid telephone calling service’ means the
right to purchase exclusively telecommunications serv-
ices that must be paid for in advance, that enables the
origination of calls using an access number, author-
ization code, or both, whether manually or electroni-
cally dialed, if the remaining amount of units of serv-
ice 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 tele-
communications services from another tele-
communications service provider and then re-
sells, 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 out-
side 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 Dis-
trict of Columbia, or any territory or possession of the
United States, any municipality, city, county, town-
ship, parish, transportation district, or assessment ju-
risdiction, or any other political subdivision within
the territorial limits of the United States with the au-
thority 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 sec-
tions 116 through this section of this title shall be construed
as bearing on Congressional intent in enacting the Internet
Tax Freedom Act or to modify or supersede the operation
of such Act.
‘‘(b) TELECOMMUNICATIONS ACT OF 1996.—Nothing
in sections 116 through this section of this title shall limit
or otherwise affect the implementation of the Telecommuni-
cations 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 add-
ing the following after the item relating to section 115:
‘‘116. Rules for determining State and local government treatment of charges re-
lated 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 sub-
section (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
1st day of the 1st month beginning more than 2 years after
the date of enactment of this Act.
Amend the title so as to read: ‘‘A bill to amend title
4 of the United States Code to establish sourcing require-
ments for State and local taxation of mobile tele-
communication services.’’.
Union Calendar No. 403
106TH CONGRESS
2D SESSION
H. R. 4391
[Report No. 106–719]
A BILL
To amend title 4 of the United States Code to es-
tablish nexus requirements for State and local
taxation of mobile telecommunication services.
JULY 10, 2000
Reported with amendments, committed to the Committee
of the Whole House on the State of the Union, and or-
dered to be printed