February 22, 2002





ENGROSSED

SENATE BILL No. 52

_____


DIGEST OF SB 52 (Updated February 20, 2002 6:00 PM - DI 103)



Citations Affected: IC 6-2.5; IC 6-8.1; IC 36-7; IC 36-8.

Synopsis: Sourcing of mobile telecommunications taxes. Implements the federal Mobile Telecommunications Sourcing Act, which provides that taxes, charges, and fees levied on wireless telephone service shall be paid to the jurisdiction where the customer's primary use of the service occurs, irrespective of where the wireless telephone service originates, terminates, or passes through. Makes conforming changes in the statutes concerning the sales tax on intrastate telecommunications service and the monthly emergency wireless enhanced 911 fee on wireless service. Specifies that implementation of the federal act does not authorize the imposition of new taxes, charges, or fees that are not otherwise authorized by law. Authorizes a provider of wireless telephone service, in the absence of an electronic data base provided by the department of state revenue or another designated data base provider, to rely on enhanced ZIP codes for purposes of assigning customer addresses to taxing jurisdictions. Provides that "bundled" offerings of taxable and nontaxable wireless service are considered taxable unless the provider of the service provides information that supports the nontaxability of a part of those services. Increases the total amount of sales tax increment financing distributions that an economic development district in the city of South Bend may receive to $1,000,000 per year. Expands the purposes for which the money received by the district may be used to include expenses related to the acquisition of a commercial retail facility or demolition of commercial property.

Effective: April 1, 2002 (retroactive); August 1, 2002.





Borst, Simpson
(HOUSE SPONSORS _ BAUER, ESPICH)




    November 20, 2001, read first time and referred to Committee on Finance.
    January 22, 2002, amended, reported favorably _ Do Pass.
    January 28, 2002, read second time, ordered engrossed.
    January 29, 2002, engrossed. Read third time, passed. Yeas 50, nays 0.

HOUSE ACTION

    January 31, 2002, read first time and referred to Committee on Ways and Means.
    February 21, 2002, amended, reported _ Do Pass.






February 22, 2002

Second Regular Session 112th General Assembly (2002)


PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts between statutes enacted by the 2001 General Assembly.


ENGROSSED

SENATE BILL No. 52



    A BILL FOR AN ACT to amend the Indiana Code concerning taxation.

Be it enacted by the General Assembly of the State of Indiana:

    SECTION 1. IC 6-2.5-4-6 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE AUGUST 1, 2002]: Sec. 6. (a) As used in this section, "telecommunication services" means the transmission of messages or information by or using wire, cable, fiber optics, laser, microwave, radio, satellite, or similar facilities. The term does not include value added services in which computer processing applications are used to act on the form, content, code, or protocol of the information for purposes other than transmission.
    (b) A person is a retail merchant making a retail transaction when the person:
        (1) furnishes or sells an intrastate telecommunication service; and
        (2) receives gross retail income from billings or statements rendered to customers.
    (c) Notwithstanding subsection (b), a person is not a retail merchant making a retail transaction when:
        (1) the person provides, installs, constructs, services, or removes tangible personal property which is used in connection with the

furnishing of the telecommunication services described in subsection (a);
        (2) the person furnishes or sells the telecommunication services described in subsection (a) to another person described in this section or in section 5 of this chapter; or
        (3) the person furnishes telecommunications services described in subsection (a) to another person who is using a prepaid telephone calling card or prepaid telephone authorization number described in IC 6-2.5-4-13. section 13 of this chapter; or
        (4) the person furnishes intrastate mobile telecommunications service (as defined in IC 6-8.1-15-7) to a customer with a place of primary use that is not located in Indiana (as determined under IC 6-8.1-15).

    SECTION 2. IC 6-8.1-15 IS ADDED TO THE INDIANA CODE AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE AUGUST 1, 2002]:
     Chapter 15. Taxing Situs of Mobile Telecommunications Service
    Sec. 1. As used in this chapter, "charges for mobile telecommunications service" means any charge for or associated with the provision of commercial mobile radio service, as defined in Section 20.3 of Title 47 of the Code of Federal Regulations as in effect on June 1, 1999, or any charge for or associated with a service provided as an adjunct to a commercial mobile radio service, that is billed to the customer by or for the customer's home service provider regardless of whether individual transmissions originate or terminate within the licensed service area of the home service provider.
    Sec. 2. (a) As used in this chapter, except as provided in subsection (b), "customer" means:
        (1) the person or entity that contracts with the home service provider for mobile telecommunications service; or
        (2) if the end user of mobile telecommunications service is not the contracting party, the end user of the mobile telecommunications service, but this subdivision applies only for the purpose of determining the place of primary use.
    (b) The term "customer" does not include:
        (1) a reseller of mobile telecommunications service; or
        (2) a serving carrier under an arrangement to serve the customer outside the home service provider's licensed service area.
    Sec. 3. As used in this chapter, "designated data base provider" means a corporation, an association, or other entity representing

the state and political subdivisions of the state that is responsible for providing an electronic data base under section 15 of this chapter and approved by the department.
    Sec. 4. As used in this chapter, "enhanced ZIP code" means a United States postal ZIP code of nine (9) or more digits.
    Sec. 5. As used in this chapter, "home service provider" means the facilities based carrier or reseller with which the customer contracts for the provision of mobile telecommunications service.
    Sec. 6. As used in this chapter, "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.
    Sec. 7. As used in this chapter, "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.
    Sec. 8. As used in this chapter, "place of primary use" means the street address representative of where the customer's use of the mobile telecommunications service primarily occurs, which must be:
        (1) the residential street address or the primary business street address of the customer; and
        (2) within the licensed service area of the home service provider.
    Sec. 9. As used in this chapter, "prepaid telephone calling service" means the right to purchase exclusively telecommunications service that must be paid for in advance that enables the origination of calls using an access number or authorization code, or both, whether manually or electronically dialed, if the remaining amount of units of service that has been prepaid is known by the provider of the prepaid service on a continuous basis.
    Sec. 10. As used in this chapter, "reseller" means a provider who purchases telecommunications service from another telecommunications service provider and then resells, uses as a component part of, or integrates the purchased service into a mobile telecommunications service. The term does not include a serving carrier with which a home service provider arranges for the service to its customers outside the home service provider's licensed service area.
    Sec. 11. As used in this chapter, "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.
    Sec. 12. The general assembly finds that:
        (1) the United States Congress has enacted the Mobile Telecommunications Sourcing Act (4 U.S.C. 116 et seq.) for the purpose of establishing uniform nationwide sourcing rules for state and local taxation of mobile telecommunications service;
        (2) the federal Mobile Telecommunications Sourcing Act provides that taxes on mobile telecommunications service shall be paid to the jurisdiction where the customer's primary use of the service occurs, irrespective of where the mobile telecommunications service originates, terminates, or passes through; and
        (3) it is desirable to implement the federal Mobile Telecommunications Sourcing Act in Indiana.
    Sec. 13. (a) Except as provided by section 20 of this chapter, this chapter applies to:
        (1) the gross retail tax imposed on mobile telecommunications service under IC 6-2.5-4-6;
        (2) the monthly emergency wireless enhanced 911 fee imposed on mobile telecommunications service under IC 36-8-16.5; and
        (3) any other tax, charge, or fee levied by the state or a taxing jurisdiction within Indiana as a fixed charge for each customer or measured by gross amounts charged to customers for mobile telecommunications service, regardless of whether the 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;
on bills for mobile telecommunications service issued to customers after July 31, 2002.
    (b) This chapter does 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:
            (A) represents compensation for a mobile telecommunications service provider's use of public

rights-of-way or other public property; and
            (B) 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 service;
        (4) any generally applicable business and occupation tax that is imposed by the state, is applied to gross receipts or gross proceeds, is the legal liability of the home service provider, and that statutorily allows the home service provider to elect to use the sourcing method required in this section; or
        (5) the determination of the taxing situs of:
            (A) prepaid telephone calling service; or
            (B) air-ground radiotelephone service as defined in Section 22.99 of Title 47 of the Code of Federal Regulations as in effect June 1, 1999.
    Sec. 14. (a) Notwithstanding any other law, mobile telecommunications service provided in a taxing jurisdiction to a customer, the charges for which are billed by or for the customer's home service provider, are considered to be provided by the customer's home service provider.
    (b) All charges for mobile telecommunications service that are considered to be provided by the customer's home service provider under this chapter 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 service originates, terminates, or passes through.
    (c) This chapter does not:
        (1) authorize a taxing jurisdiction to impose a tax, charge, or fee that the jurisdiction is not otherwise authorized to impose; or
        (2) modify, impair, supersede, or authorize the modification, impairment, or supersession of the law of any taxing jurisdiction pertaining to taxation except as expressly provided by this chapter.
    Sec. 15. (a) The department may provide an electronic data base to a home service provider or, if the department does not provide an electronic data base to home service providers, the designated data base provider may provide an electronic data base to a home service provider. The department or the designated data base provider shall provide the data base in a format that complies with the requirements of the federal Mobile Telecommunications Sourcing Act (4 U.S.C. 116 et seq.).


    (b) The department or designated data base provider shall provide notice of the availability of the then current electronic data base and any subsequent revisions of the data base by publication in the manner normally employed for the publication of informational tax, charge, or fee notices to taxpayers in Indiana.
    (c) A home service provider using the data contained in an electronic data base described in this section 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 the data base. The home service provider shall reflect changes made to the data base during a calendar quarter not later than thirty (30) days after the end of the calendar quarter.
    Sec. 16. (a) If an electronic data base is not provided under section 15 of this chapter, a home service provider shall be held harmless from any tax, charge, or fee liability in Indiana 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 18 of this chapter, 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 street address is assigned to the correct taxing jurisdiction. If an enhanced ZIP code overlaps boundaries of taxing jurisdictions of the same level, the home service provider must designate one (1) specific jurisdiction within the enhanced ZIP code for use in taxing the activity for that enhanced ZIP code for each level of taxing jurisdiction. Any enhanced ZIP code assignment changed in accordance with section 18 of this chapter is considered to be in compliance with this section.
    (b) For purposes of this section, there is a rebuttable presumption that a home service provider has exercised due diligence if the home service provider demonstrates that it has:
        (1) expended reasonable resources to implement and maintain an appropriately detailed electronic data base of street address assignments to taxing jurisdictions;
        (2) implemented and maintained reasonable internal controls to promptly correct misassignments of street addresses to taxing jurisdictions; and
        (3) used all reasonably obtainable and usable data pertaining to municipal annexation, incorporations, reorganizations, and any other changes in jurisdictional boundaries that materially affect the accuracy of the data base.
    (c) This section applies to a home service provider that is in compliance with the requirements of this section until the later of:
        (1) eighteen (18) months after the nationwide standard numeric code described in the federal Mobile Telecommunications Sourcing Act (4 U.S.C. 116 et seq.) has been approved by the Federation of Tax Administrators and the Multistate Tax Commission; or
        (2) six (6) months after the department or a designated data base provider provides a data base as described in section 15 of this chapter.
    Sec. 17. (a) A home service provider is responsible for obtaining and maintaining the customer's place of primary use. Subject to section 18 of this chapter, a home service provider may rely on the applicable residential or business street address supplied by the home service provider's customer and is not liable for any additional taxes, charges, or fees based on a different determination of the place of primary use for taxes, charges, or fees that are customarily passed on to the customer as a separate itemized charge if the reliance on information provided by its customer is in good faith.
    (b) Except as provided in section 18 of this chapter, a home service provider may treat the address used by the home service provider for tax purposes for any customer under a service contract or agreement in effect on or before July 28, 2002, as that customer's place of primary use for the remaining term of the service contract or agreement, excluding any extension or renewal of the service contract or agreement, for purposes of determining the taxing jurisdictions to which taxes, charges, or fees on charges for mobile telecommunications service are remitted.
    Sec. 18. (a) The department may determine that the address used for purposes of determining the taxing jurisdictions to which taxes, charges, or fees for mobile telecommunications service are remitted does not meet the definition of "place of primary use" in this chapter 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. Before the department gives a notice of determination, the customer must be given an opportunity to demonstrate in accordance with department rules and administrative procedures that the address is the customer's place of primary use.
    (b) The department may determine that the assignment of a taxing jurisdiction by a home service provider under section 16 of

this chapter 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. The home service provider must be given an opportunity to demonstrate in accordance with department rules and administrative procedures that the assignment reflects the correct taxing jurisdiction.
    Sec. 19. If charges for nontaxable mobile telecommunications service are aggregated with and not separately stated from charges that are subject to taxation, the charges for nontaxable mobile telecommunications service are subject to taxation unless the home service provider can reasonably identify charges not subject to the tax, charge, or fee from its books and records that are kept in the regular course of business.
    Sec. 20. Notwithstanding any other provision of this chapter, this chapter does not apply to any tax, charge, or fee levied by the state or a taxing jurisdiction within Indiana beginning on the date of entry of a final judgment on the merits by a court that:
        (1) is based on federal law;
        (2) is no longer subject to appeal; and
        (3) substantially limits or impairs the essential elements of the federal Mobile Telecommunications Sourcing Act (4 U.S.C. 116 et seq.).
    Sec. 21. (a) If a customer believes that an amount of tax, charge, or fee or an assignment of place of primary use or taxing jurisdiction included on a bill under this chapter is erroneous, the customer shall notify the home service provider in writing. The customer shall include in the written notification the street address for the customer's place of primary use, the account name and number for which the customer seeks a correction, a description of the error asserted by the customer, and any other information that the home service provider reasonably requires to process the request.
    (b) Within sixty (60) days after receiving a notice under this section, the home service provider shall review its records to determine the customer's taxing jurisdiction. If the review shows that the amount of tax, charge, or fee or assignment of place of primary use or taxing jurisdiction is in error, the home service provider shall correct the error and refund or credit the amount of tax, charge, or fee erroneously collected from the customer for a period of up to two (2) years. If the review shows that the amount of tax, charge, or fee or assignment of place of primary use or

taxing jurisdiction is correct, the home service provider shall provide a written explanation to the customer.
    (c) The procedures set forth in this section are the first course of remedy available to a customer seeking correction of assignment of place of primary use or taxing jurisdiction, or a refund of or other compensation for taxes, charges, or fees erroneously collected by the home service provider. No cause of action based upon a dispute arising from the collection of any such taxes, charges, or fees shall accrue until a customer has exhausted the remedies set forth in this section.

    SECTION 3. IC 36-7-26-1, AS AMENDED BY P.L.291-2001, SECTION 200, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE APRIL 1, 2002 (RETROACTIVE)]: Sec. 1. This chapter applies to the following:
        (1) A city having a population of more than seventy-five thousand (75,000) but less than ninety thousand (90,000).
        (2) A city having a population of more than ninety thousand (90,000) but less than one hundred ten thousand (110,000). one hundred five thousand (105,000) but less than one hundred twenty thousand (120,000).
        (3) A city having a population of more than one hundred fifty thousand (150,000) but less than five hundred thousand (500,000).
        (4) A city having a population of more than one hundred twenty thousand (120,000) but less than one hundred fifty thousand (150,000).
    SECTION 4. IC 36-7-26-23, AS AMENDED BY P.L.291-2001, SECTION 202, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE APRIL 1, 2002 (RETROACTIVE)]: Sec. 23. (a) Before the first business day in October of each year, the board shall require the department to calculate the net increment for the preceding state fiscal year. The department shall transmit to the board a statement as to the net increment in sufficient time to permit the board to review the calculation and permit the transfers required by this section to be made on a timely basis.
    (b) There is established a sales tax increment financing fund to be administered by the treasurer of state. The fund is comprised of two (2) accounts called the net increment account and the credit account.
    (c) On the first business day in October of each year, that portion of the net increment calculated under subsection (a) that is needed:
        (1) to pay debt service on the bonds issued under section 24 of this chapter or to pay lease rentals under section 24 of this

chapter; and
        (2) to establish and maintain a debt service reserve established by the commission or by a lessor that provides local public improvements to the commission;
shall be transferred to and deposited in the fund and credited to the net increment account. Money credited to the net increment account is pledged to the purposes described in subdivisions (1) and (2), subject to the other provisions of this chapter.
    (d) On the first business day of October in each year, the remainder of:
        (1) eighty percent (80%) of the gross increment; minus
        (2) the amount credited to the net increment account on the same date;
shall be transferred and credited to the credit account.
    (e) The remainder of:
        (1) the gross increment; minus
        (2) the amounts credited to the net increment account and the credit account;
shall be deposited by the auditor of state as other gross retail and use taxes are deposited.
    (f) A city described in section 1(2), 1(3), or 1(4) of this chapter may receive not more than fifty percent (50%) of the net increment each year. During the time a district exists in a city described in section 1(2), 1(3) or 1(4) of this chapter, not more than a total of one million dollars ($1,000,000) of net increment may be paid to the city described in section 1(2), 1(3) or 1(4) of this chapter. During each year that a district exists in a city described in section 1(2) of this chapter, not more than one million dollars ($1,000,000) of net increment may be paid to the city described in section 1(2) of this chapter.
    (g) The auditor of state shall disburse all money in the fund that is credited to the net increment account to the commission in equal semiannual installments on November 30 and May 31 of each year.
    SECTION 5. IC 36-7-26-24, AS AMENDED BY P.L.185-2001, SECTION 9, AND AS AMENDED BY P.L.291-2001, SECTION 203, IS AMENDED AND CORRECTED TO READ AS FOLLOWS [EFFECTIVE APRIL 1, 2002 (RETROACTIVE)]: Sec. 24. (a) The commission may issue bonds, payable in whole or in part, from money distributed from the fund to the commission, to finance a local public improvement under IC 36-7-14-25.1 or may make lease rental payments for a local public improvement under IC 36-7-14-25.2 and IC 36-7-14-25.3. The term of any bonds issued under this section may not exceed twenty (20) years, nor may the term of any lease agreement

entered into under this section exceed twenty (20) years. The commission shall transmit to the board a transcript of the proceedings with respect to the issuance of the bonds or the execution and delivery of a lease agreement as contemplated by this section. The transcript must include a debt service or lease rental schedule setting forth all payments required in connection with the bonds or the lease rentals.
    (b) On January 15 of each year, the commission shall remit to the treasurer of state the money disbursed from the fund that is credited to the net increment account that exceeds the amount needed to pay debt service or lease rentals and to establish and maintain a debt service reserve under this chapter in the prior year and before May 31 of that year. Amounts remitted under this subsection shall be deposited by the auditor of state as other gross retail and use taxes are deposited.
    (c) The commission in a city described in section 1(2) of this chapter may only distribute money from the fund only for the following:
        (1)
Road, interchange, and right-of-way improvements. and for
         (2) Acquisition costs of a commercial retail facility and for real property acquisition costs in furtherance of the road, interchange, and right-of-way improvements.
        (3) Demolition of commercial property and any related expenses incurred before or after the demolition of the commercial property.
        (4) Physical improvements or alterations of property that enhance the commercial viability of the district.

    (d) The commission in a city described in section 1(3) of this chapter may distribute money from the fund only for the following purposes:
        (1) For road, interchange, and right-of-way improvements and for real property acquisition costs in furtherance of the road, interchange, and right-of-way improvements.
        (2) For the demolition of commercial property and any related expenses incurred before or after the demolition of the commercial property.
    (e) The commission in a city described in section 1(4) of this chapter may distribute money from the fund only for the following purposes:
        (1) For:
            (A) the acquisition, demolition, and renovation of property; and
            (B) site preparation and financing;
        related to the development of housing in the district.


        (2) For physical improvements or alterations of property that enhance the commercial viability of the district.
    SECTION 6. IC 36-8-16.5-25 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE AUGUST 1, 2002]: Sec. 25. (a) As used in this section, "customer" and "place of primary use" have the meanings set forth in IC 6-8.1-15.
    (b)
Except as provided in section 34 of this chapter, the board shall assess a monthly emergency wireless enhanced 911 fee on each CMRS mobile telephone number that has a billing address in Indiana. assigned to a customer with a place of primary use in Indiana. A customer's place of primary use shall be determined in the manner provided by IC 6-8.1-15.
    SECTION 7. IC 36-8-16.5-30 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE AUGUST 1, 2002]: Sec. 30. (a) As used in this section, "customer" and "place of primary use" have the meanings set forth in IC 6-8.1-15.
    (b)
Except as provided in section 34 of this chapter, each CMRS provider, as part of its monthly billing process, shall bill each CMRS mobile telephone number assigned to a customer with a place of primary use in Indiana for the emergency wireless enhanced 911 fee. A customer's place of primary use shall be determined in the manner provided by IC 6-8.1-15. The CMRS provider may list the fee as a separate line item on each bill. If a CMRS provider receives a partial payment for a monthly bill from a CMRS subscriber, the CMRS provider shall apply the payment against the amount the CMRS subscriber owes to the CMRS provider before applying the payment against the fee.
    SECTION 8. An emergency is declared for this act.