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Federal MobileTelecommunications

Sourcing Act

Sarah M. BleakleyCounsel to Florida Association of Counties

Nabors, Giblin & Nickerson, P.A.

(850)224-4070

E-mail: SBleakley@ngn-tally.com

Mobile Sourcing Act’sEffect on State & Local

TaxesPre Mobile SourcingAct (“MSA”)Post MSA TaxationSimplificationState and LocalRequirements

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Pre Mobile Sourcing ActRules of Tax Situs

Commerce Clause Limits State &Local Government Taxing AuthorityGoldberg v. Sweet, 488 U.S. 252(1989) Said Jurisdictions Could Tax aTelecommunication:� If It Originates and Terminates in Jurisdiction� OR If It Originates or Terminates and is Billed

to an Address in Jurisdiction

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Call by CallDetermination

Under Goldberg, mobile carriersdetermined where each call was placedand what jurisdiction's tax rates applied.

Different taxing authorities useddifferent methods for determiningwhether a tax was due.

Growing problem, given bucket pricing.

Roaming Example

Tampa, FloridaHillsborough County

Phoenix, ArizonaTempe, Arizona

Grand CanyonLake Powell

Tallahassee, FloridaLeon County

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Tax Administration UnderGoldberg

Confusing andConfusing andcostly tocostly tocompaniescompanies

Confusing andConfusing andcostly to state andcostly to state andlocal governmentslocal governments

Confusing andConfusing andcostly forcostly forcustomerscustomers

Taxation of Mobile CallsUnder Goldberg

Roaming Callers

Multiple jurisdictionslevying tax on asingle customer

Multiple taxation of asingle call.

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MSA: Public Law 106-252 (HR 4391)

Joint Effort of Communication Servicesand Government Groups� Simplify Billing Statements

� Reduce Cost of Tax Administration

� Provide Certainty and Consistency

� Eliminate Double Taxation

MSA Major Provisions

Uniform SourcingRules

Rules for Taxationof Bundled Services

Industry SafeHarbor

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Uniform Sourcing RulesSets a uniform basis for determiningwhich jurisdiction may tax mobileservices.

Assigns for purpose of state and localtaxation a consumer’s purchase ofwireless services to a single place.

Allows a jurisdiction that contains acustomer’s place of primary use to taxthe service.

Taxes Subject to MSA

Broad application to state and localtransactional taxes on mobiletelecommunications, regardless ofnomenclature, rate calculation, or payer.

Not applicable to income taxes, prepaidcalling cards or air-ground radio-telephone.

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Customer’s Place ofPrimary Use (“PPU”)

The residentialstreet address or thebusiness streetaddress

Representative ofwhere thecustomer’s use ofthe phone primarilyoccurs

Goldberg vs. MSA

Goldberg

Situs call by call.

Originate andterminates or

Originates orterminates and isbilled at serviceaddress.

MSA

Situs Once byPrimary Use

MSA allows stateand local taxation ofmobile service thatneither originate orterminate injurisdiction.

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State & Local Adoptionof MSA Rules

Revise state and local law, imposing taxin jurisdiction of customer’s primaryplace of use.

Consider changing tax base to includeall wireless services.

May also adjust tax receipts within statethrough revenue sharing.

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MMMMSSSSAAAA ffffoooorrrr BBBBuuuunnnnddddlllleeeeddddMMMMSSSSAAAA ffffoooorrrr BBBBuuuunnnnddddlllleeeedddd

SSSSeeeerrrrvvvviiiicccceeeessssSSSSeeeerrrrvvvviiiicccceeeessss�� When no tax is imposed on aWhen no tax is imposed on amobile telecomm service, but it ismobile telecomm service, but it issold with a taxable service, thensold with a taxable service, thenthe tax may apply to the entirethe tax may apply to the entirebundle unless the home servicebundle unless the home serviceprovider can reasonably identifyprovider can reasonably identifycharges not subject to the tax fromcharges not subject to the tax fromits books and records.its books and records.

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Segregating AmongSegregating Among

BundlesBundles�� Examples of Non-taxable MobileExamples of Non-taxable Mobile

Services, depending onServices, depending onjurisdictionjurisdiction�� Long DistanceLong Distance

�� Interstate Long DistanceInterstate Long Distance

�� Internet AccessInternet Access

State & Local BundlingLaw Changes

Determine pre MSA bundling rules.

Talk with auditors about books andrecords.

Draft limited exemption for bundledservices� apply only to non-taxable mobile

telecommunication services

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Too Many Addresses

Difficulty ofDeterminingAddress Jurisdiction� Tax Situs

� Tax Rate

� Tax ReceiptRemittance

Industry Need forCertainty

?MSA Offers Safe Harbor

Must use state’selectronic addressdatabase or, if noneavailable, enhancedzip code (Zip PlusFour)

No liability formistakes indatabase

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State Address Database

Decision to develop state data basedepends on� Reliance on Wireless Revenues

� View of Zip plus Four Accuracy

Address data base format approved bythe Federation of Tax Administratorsand the Multi-state Tax Commission.

Revenue EstimatingIssues with MSA

Revenue neutral nation-wide, said CBO

But fiscal effects may vary from state tostate and local to local.� Determine jurisdiction’s breadth of taxation

under Goldberg.

� Compare with revised tax base, if any,under post MSA adopted legislation.

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Post MSA Revenues

LOOSERS

Universitycommunities

Migratory havens

Tourist traps

State capitals

WINNERS

Communities with ahigh number oftravelers

It’s the law!

MSA Effective Date: August 1, 2002

For Examples of Legislation� Section 202.155, Florida Statutes, on

Sourcing and Bundling

� Section 202.22, Florida Statutes, on StateData Base

� http://www.leg.state.fl.us