STATES ENCOURAGED TO CLARIFY SOURCING RULES FOR TELECOM SERVICE

New rules are to address telecom services not fitting in scope of Goldberg Rule (from 1989 federal court case Goldberg v. Sweet), which allows jurisdictions to tax telecom service for transactional tax purposes if service (1) originates and terminates in single jurisdiction or (2) terminates in the taxing jurisdiction and service or billing address is in same taxing jurisdiction. New products create possibility that some telecom services aren’t taxed by any jurisdiction and others are taxed by more than one jurisdiction, task force resolution said. It also referenced previous task force resolution that state and local taxes and fees imposed on telecom services be substantially simplified and modernized to minimize confusion and ease burden of administration on govt.

Telecom companies cited need for clarification on taxation of bundled services, which include some taxable and nontaxable components. Internet access, for which Congress bans taxation, often is component in bundled services. Congress is considering several bills to extend or make permanent ban on Internet access tax. Ark., Conn., Kan., and Mo. have passed legislation clarifying how bundled services should be taxed. “Support from this committee will be instrumental in passing similar legislation in the remaining 46 states,” telecom companies said in joint statement. Federal law requires states to revise mobile phone sourcing through legislation by Aug. 1, 2002. Telecom companies said states should address bundling while revising mobile sourcing rule.

Telecom companies asked task force to circulate following language for consideration in states: “If a taxing jurisdiction does not otherwise subject certain charges for communications services to taxation, and if these charges are aggregates with and not separately stated from other charges for communications services that are subject to taxation, then the charges for the nontaxable communications services will not be subject to taxation if the service provider can reasonably identify such charges on its books and records kept in the regular course of business.” Telecom companies endorsing language include AT&T, BellSouth, Qwest, SBC, Sprint, Verizon, Verizon Wireless, WorldCom.

SSTP, 32-state project to simplify sales tax and facilitate taxation of e-commerce, is working with telecom companies to create sourcing rules for telecom service. Telecom industry jointly submitted to Advisory Commission on E-Commerce 2 models for simplified system for state and local transaction taxes that included: (1) State administration of local taxes. (2) Nationwide uniform definitions and sourcing rules. (3) Uniform tax bases between states and their localities. (4) State databases of address and tax rates on which carriers could rely and be held harmless. (5) Timely advance notice of tax rate and tax base changes. (6) Vendor’s compensation. Telecom companies emphasized to task force “hold harmless provisions” that would shield providers from potential class action lawsuits from overtaxed consumers.

Telecom companies also asked task force to work with industry to develop reforms on taxing telecom infrastructure deployment. Kristin Goodin, Verizon state tax counsel, told task force that tax burden on infrastructure deployment was disproportionately high compared with other industries, mostly because of taxing structure held over from regulation. Also, few states give telecom industry same sales tax exemption on equipment that many manufacturers receive. While 37 states provide sales tax exemption for manufacturing equipment, only 15 have similar exemption for telecom equipment, with 2 limiting exception of broadband equipment, telecom companies said. Property taxes also discriminate against telecom providers, they said. They encouraged task force to work with industry to develop property tax reform models, encourage states to eliminate discriminatory property taxes on telecom companies and support sales tax exemption for deployment of telecom equipment, including high- speed Internet equipment. -- Terry Lane

NCSL Notebook…

National Conference of State Legislators (NCSL) Commerce & Communications Committee adopted resolution that opposed federal legislation that would require states to pass laws against driving while using cellphones. Resolution will go before full NCSL business meeting Wed., and sources told us resolutions passed by committee nearly always are approved at business meeting. While state legislators differed in their opinions of restrictions on driving with cellphones, most were concerned about potential federal legislation requiring states to ban driver use hand-held phones or lose federal highway funds. Rep. Dana Danburg (D) said such federal law would be “blackmail” to states and questioned rationale of withholding highway funds. “It’s not the way to deal with the issue,” she said. N.Y. Assemblyman Felix Ortiz (D), sponsor of ban passed in N.Y. Legislature, implored his colleagues to pass similar bill, but wouldn’t offer opinion on federal legislation. Sen. Corzine (D-N.J.) and Rep. Ackerman (D-N.Y.) have introduced bills (S-927, HR-1837) that would force states to act on driver cellphone use. HR-1837 would allow hands-free cellphone devices, while S-927 would let the states decide whether hands-free use still posed threat to public safety. States that failed to comply would lose portion of federal highway funds. In June, N.Y. passed ban that allowed only hands-free devices. Seven other states have passed limited cellphone restrictions on school bus drivers, teens and other narrowly defined driver categories, NCSL said. Two witnesses who testified before NCSL Commerce & Communications Committee said cellphone use wasn’t worst distraction drivers encountered. David Eisenberg of Sprint said U. of N.C. study said most common distractions were: (1) Outside object, person or event. (2) Eating and drinking. (3) Adjusting radios. (4) Other occupants. Cellphones were “far down the list,” he said. Eisenberg encouraged NCSL to adopt resolution opposing any federal legislation. He said federal law for all intents and purposes would be “preemptive” action because states would have no choice but to pass ban for fear of losing crucial highway funds. Lisa Sheikh of Partnership for Safe Driving and supporter of federal legislation, acknowledged other distractions and said some states had passed measures banning distracted driving, although most were weak and had weak penalties, even in event of fatality. Sheikh told of woman whose daughter was killed when driver ran stop sign while using cellphone, then was fined $50 and received 2 tickets in mail. Points on his license weren’t enough to suspend driving privileges, Sheikh said. Danburg asked whether legislation was needed to ban “screeching babies with dirty diapers” and host of other possible distractions. But Sheikh said cellphones posed unique distraction because they were “all-consuming” by forcing driver to operate auto with one hand while engaging in conversation. John Moffett of National Assn. of Governors Highway Safety Representatives, said more study was needed and said research on issue was appropriate role for federal govt. Fla., Ia., Md., Mass., Mont., Mich., Penn., Ore, Tenn. and Tex. are among states conducting their own research on cellphone use and distracted driving. -- TL

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SBC, with hq in San Antonio, was leading sponsor of NCSL annual meeting, donating more than $100,000, according to San Antonio Express-News, which included critics’ opinions that corporations were “paying for access to power.” Several telecom companies were top donors to conference, including Motorola and Sprint, $50,000-$74,999; AT&T, Verizon and MCI WorldCom, $25,000- $49,999. “Firms, groups help foot bill for lawmaker meeting” was the newspaper’s lead story Aug. 11, first day of conference that draws more than 6,000. NCSL spokesman said legislators had discouraged the use of public funds for such conferences: “They think the funding should come from corporations.” SBC spokesman told the Express-News that “opportunity to support our home city in the state of Texas was the motivation from the get-go.”