GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2001
S	1
SENATE BILL 144

 
 
Short Title:	Streamlined Sales and Use Tax Agreement.	()	
Sponsors:	Senators Kerr, Hartsell, Hoyle, Dalton, Webster; and Berger.	
Referred to:	Finance.	
February 14, 2001

A BILL TO BE ENTITLED
AN ACT to enable north carolina to enter the streamlined sales and use tax agreement.

The General Assembly of North Carolina enacts:

PART 1. UNIFORM SALES AND USE TAX ADMINISTRATION ACT

SECTION 1.1.  Article 5 of Chapter 105 of the General Statutes is amended by adding a new Part 7A to be titled "Uniform Sales and Use Tax Administration Act." The following statutes are recodified in the new Part 7A:  G.S. 105‑164.43A(a) is recodified as G.S. 105‑164.42H(a); G.S. 105‑164.43A(b) is recodified as G.S. 105‑164.42I(a); G.S. 105‑164.43B is recodified as G.S. 105‑164.42I(b).
SECTION 1.2.  G.S. 105‑164.43C is repealed.
SECTION 1.3.  Part 7A of Article 5 of Chapter 105 of the General Statutes, as created in Section 1 of this act, reads as rewritten:
"Part 7A. Uniform Sales and Use Tax Administration Act.
"§ 105-164.42A.  Short title.
This Part is the 'Uniform Sales and Use Tax Administration Act' and may be cited by that name.
"§ 105-164.42B.  Definitions.
The following definitions apply in this Part:
(1)	Agreement. – The Streamlined Sales and Use Tax Agreement.
(2)	Certified automated system. – Software certified jointly by the states that are signatories to the Agreement to calculate the tax imposed by each jurisdiction on a transaction, determine the amount of tax to remit to the appropriate state, and maintain a record of the transaction.
(3)	Certified service provider. – An agent certified jointly by the states that are signatories to the Agreement to perform all of the seller's sales tax functions.
(4)	Member state. – A state that has entered into the Agreement.
(5)	Person. -- Defined in G.S. 105-228.90.
(6)	Sales tax. – The tax levied in G.S. 105-164.4.
(7)	Seller. – A person making sales, leases, or rentals of personal property or services.
(8)	State. – The term "this State" means the State of North Carolina. Otherwise, the term "state" means any state of the United States and the District of Columbia.
(9)	Use tax. – The tax levied in G.S. 105-164.6.
"§ 105-164.42C.  Authority to enter Agreement.
The Secretary is authorized to enter into the Agreement with one or more states to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance for all sellers and for all types of commerce. The Secretary may act jointly with other member states to establish standards for certification of a certified service provider and a certified automated system and to establish performance standards for multistate sellers.
The Secretary is authorized to represent this State before the other member states. The Secretary may take any other actions reasonably required to implement this Part, including the joint procurement with other member states of goods and services in furtherance of the Agreement.
"§ 105-164.42D. Relationship to North Carolina law.
No provision of the Agreement authorized by this Part invalidates or amends any provision of the law of this State. Adoption of the Agreement by this State does not amend or modify any law of this State. Implementation of a condition of the Agreement in this State must be made pursuant to an act of the General Assembly.
"§ 105-164.42E. Agreement requirements.
The Secretary may not enter into the Agreement unless the Agreement requires each state to abide by the following requirements:
(1)	Uniform state rate. – The Agreement must set restrictions to achieve more uniform state rates through the following:
a.	Limiting the number of state rates.
b.	Eliminating maximums on the amount of state tax that is due on a transaction.
c.	Eliminating thresholds on the application of a state tax.
(2)	Uniform standards. – The Agreement must establish uniform standards for all of the following:
a.	The sourcing of transactions to taxing jurisdictions.
b.	The administration of exempt sales.
c.	The allowances a seller can take for bad debts.
d.	Sales and use tax returns and remittances.
(3)	Uniform definitions. – The Agreement must require states to develop and adopt uniform definitions of sales and use tax terms. The definitions must enable a state to preserve its ability to make policy choices not inconsistent with the uniform definitions.
(4)	Central registration. – The Agreement must provide a central, electronic registration system that allows a seller to register to collect and remit sales and use taxes for all signatory states.
(5)	No nexus attribution. – The Agreement must provide that registration with the central registration system and the collection of sales and use taxes in the signatory states will not be used as a factor in determining whether the seller has nexus with a state for any tax.
(6)	Local sales and use taxes. – The Agreement must provide for reduction of the burdens of complying with local sales and use taxes through one or more of the following:
a.	Restricting and eliminating variances between the state and local tax bases.
b.	Requiring states to administer any sales and use taxes levied by local jurisdictions within the state so that sellers collecting and remitting these taxes will not have to register or file returns with, remit funds to, or be subject to independent audits from local taxing jurisdictions.
c.	Restricting the frequency of changes in the local sales and use tax rates and setting effective dates for the application of local jurisdictional boundary changes to local sales and use taxes.
d.	Providing notice of changes in local sales and use tax rates and of changes in the boundaries of local taxing jurisdictions.
(7)	Monetary allowances. –The Agreement must outline any monetary allowances that are to be provided by the states to sellers or certified service providers.
(8)	State compliance. – The Agreement must require each state to certify compliance with the terms of the Agreement before becoming a member and to maintain compliance, under the laws of the member state, with all provisions of the Agreement while a member.
(9)	Consumer privacy. – The Agreement must require each state to adopt a uniform policy for certified service providers that protects the privacy of consumers and maintains the confidentiality of tax information.
"§ 105-164.42F. Cooperating sovereigns.
The Agreement authorized by this Part is an accord among individual cooperating sovereigns in furtherance of their governmental functions. The Agreement provides a mechanism among the member states to establish and maintain a cooperative, simplified system for the application and administration of sales and use taxes under the laws of each member state.
"§ 105-164.42G. Effect of Agreement.
Entry of this State into the Agreement does not create a cause of action or a defense to an action. No person may challenge any action or inaction by a department, agency, or other instrumentality of this State, or a political subdivision of this State, on the ground that the action or inaction is inconsistent with the Agreement. No law of this State, or its application, may be declared invalid on the ground that the provision or application is inconsistent with the Agreement.
"§ 105‑164.42H.  Certification of certified automated system and effect of certification.
(a)	Certification. – The Secretary may certify a software program as a certified automated system if the Secretary determines that the program correctly determines all of the following and that the software can generate reports and returns required by the Secretary:
(1)	The applicable combined State and local sales and use tax rate for a sale, based on a ship‑to address.
(2)	Whether or not an item is exempt from tax, based on a uniform product code or another method.
(3)	Whether or not an exemption certificate offered by a purchaser is a valid certificate, based on the Department's registry of holders of exemption certificates.
(4)	The amount of tax to be remitted for each taxpayer for a reporting period.
(5)	Any other issue necessary for the application or calculation of sales and use tax due.
(b)	Liability. – A seller may choose to use a certified automated system in performing its sales tax administration functions. A seller that uses a certified automated system is liable for sales and use taxes due on transactions it processes using the certified automated system except for underpayments of tax attributable to errors in the functioning of the system. A person that provides a certified automated system is responsible for the proper functioning of that system and is liable for underpayments of tax attributable to errors in the functioning of the system.
"§ 105‑164.42I.  Contract with certified service provider and effect of contract.
(a)	Certification. – The Secretary may certify an entity as a certified service provider if the entity meets all of the following requirements:
(1)	The entity uses a certified automated system.
(2)	The entity has agreed to update its program upon notification by the Secretary.
(3)	The entity integrates its certified automated system with the system of a seller for whom the entity collects tax so that the tax due on a sale is determined at the time of the sale.
(4)	The entity remits the taxes it collects at the time and in the manner specified by the Secretary.
(5)	The entity agrees to file sales and use tax returns on behalf of the sellers for whom it collects tax.
(6)	The entity enters into a contract with the Secretary and agrees to comply with all the conditions of the contract.
(b)	Contract. – The Secretary may contract with a certified service provider for the collection and remittance of sales and use taxes. A certified service provider must file with the Secretary a bond or an irrevocable letter of credit in the amount set by the Secretary. A bond must be conditioned upon compliance with the contract, be payable to the State, and be in the form required by the Secretary. The amount a certified service provider charges under the contract is a cost of collecting the tax and is payable from the amount collected.
(c)	Liability. – A seller may contract with a certified service provider to collect and remit sales and use taxes payable to the State on sales made by the seller. A certified service provider with whom a seller contracts is the agent of the seller. As the seller's agent, the certified service provider, rather than the seller, is liable for sales and use taxes due this State on all sales transactions the certified service provider processes for the seller unless the seller misrepresents the type of products it sells or commits fraud. A seller that misrepresents the type of products it sells or commits fraud is liable for taxes not collected as a result of the misrepresentation or fraud.
(d)	Audit and Review. – In the absence of misrepresentation or fraud, a seller that contracts with a certified service provider is not subject to audit on the transactions processed by the certified service provider. A seller is subject to audit for transactions not processed by the certified service provider. The State may perform a system check of a seller and review a seller's procedures to determine if the certified service provider's system is functioning properly and the extent to which the seller's transactions are being processed by the certified service provider. A certified service provider is subject to audit.
"§ 105-164.42J. Performance standard for multistate seller.
The Secretary may establish a performance standard for a seller that is engaged in business in this State and at least 10 other states and has developed a proprietary system to determine the amount of sales and use taxes due on transactions. A seller that enters into an agreement with the Secretary that establishes a performance standard for that system is liable for the failure of the system to meet the performance standard."

PART 2. CONFORMING CHANGES

SECTION 2.1.  The introductory language of G.S. 105‑164.3 reads as rewritten:
"§ 105‑164.3.  Definitions.
The following definitions apply in this Article:"
SECTION 2.2.  G.S. 105‑164.3, as amended by Section 2.1 of this act, is amended by adding the following new subdivisions:
"§ 105‑164.3.  Definitions.
The following definitions apply in this Article:
....
(2a)	Candy. – A preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces that do not require refrigeration. The term does not include any preparation that contains flour.
....
(4a)	Delivery charges. – Charges imposed by the retailer for preparation and delivery of personal property or services to a location designated by the consumer.
....
(4b)	Dietary supplement. – A product that is intended to supplement the diet of humans and is required to be labeled as a dietary supplement under federal law, identifiable by the "Supplement Facts" box found on the label.
....
(5a)	Food. – Substances that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. The substances may be in liquid, concentrated, solid, frozen, dried, or dehydrated form. The term does not include alcoholic beverages, as defined in G.S. 105-113.68, or tobacco products, as defined in G.S. 105-113.4.
....
(5b)	Food sold through a vending machine. – Food dispensed from a machine or another mechanical device that accepts payment.
....
(12a)	Purchase price. – The term has the same meaning as the term "sales price" when applied to an item subject to use tax.
....
(16b)	Soft drink. – A nonalcoholic beverage that contains natural or artificial sweeteners. The term does not include beverages that contain one or more of the following:
a.	Milk or milk products.
b.	Soy, rice, or similar milk substitutes.
c.	More than fifty percent (50%) vegetable or fruit juice."
SECTION 2.3.  G.S. 105‑164.3(11a) reads as rewritten:
"(11a)	Prepared food. – Food that meets at least one of the following conditions:
a.	It is sold in a heated state or it is heated by the retailer.
b.	It consists of two or more foods mixed or combined by the retailer for sale as a single item.
c.	It is sold with eating utensils provided by the retailer, such as plates, knives, forks, spoons, glasses, cups, napkins, and straws.
The term does not include food the retailer sliced, repackaged, or pasteurized but did not otherwise process."
SECTION 2.4.  G.S. 105‑164.3(13) reads as rewritten:
"(13)	Retail sale or sale at retail. – The sale, lease, or rental for any purpose other than for resale, sublease, or subrent."
SECTION 2.5.  G.S. 105‑164.3(16) reads as rewritten:
"(16)	"
	
	"

	
	
Sales price. – The total amount or consideration for which personal property or services are sold, leased, or rented. The consideration may be in the form of cash, credit, property, or services.
a.	The sales price must be valued in money, regardless of whether it is received in money. The term includes all of the following:
1.	The retailer's cost of the property sold.
2.	The cost of materials used, labor or service costs, interest, losses, all costs of transportation to the retailer, all taxes imposed on the retailer, and any other expense of the retailer.
3.	Charges by the retailer for any services necessary to complete the sale.
4.	Delivery charges.
5.	Installation charges.
6.	The value of exempt personal property given to the consumer when taxable and exempt personal property are bundled together and sold by the retailer as a single product or piece of merchandise.
b.	The term does not include any of the following:
1.	Discounts, including cash, term, or coupons, that are not reimbursed by a third party, are allowed by the retailer, and are taken by a consumer on a sale.
2.	Interest, financing, and carrying charges from credit extended on the sale, if the amount is separately stated on the invoice, bill of sale, or a similar document given to the consumer.
3.	Any taxes imposed directly on the consumer that are separately stated on the invoice, bill of sale, or similar document given to the consumer."
SECTION 2.6.  G.S. 105‑164.3(16c) is recodified as G.S. 105‑164.3(16d).  G.S. 105‑164.3(16b) is recodified as G.S. 105‑164.3(16c).
SECTION 2.7.  G.S. 105‑164.12 is repealed.
SECTION 2.8.  G.S. 105‑164.13 is amended by adding the following new subdivisions:
"(47)	An amount charged as a deposit on a beverage container that is returnable to the vendor for reuse when the amount is refundable or creditable to the vendee, whether or not the deposit is separately charged.
(48)	An amount charged as a deposit on an aeronautic, automotive, industrial, marine, or farm replacement part that is returnable to the vendor for rebuilding or remanufacturing when the amount is refundable or creditable to the vendee, whether or not the deposit is separately charged. This exemption does not include tires or batteries.
(49)	Installation charges when the charges are separately stated.
(50)	Fifty percent (50%) of the sales price of tangible personal property sold through a coin-operated vending machine, other than closed-container soft drinks and tobacco."
SECTION 2.9.  G.S. 105‑164.13B reads as rewritten:
"§ 105‑164.13B.  Food exempt from tax.
Except as provided in this section, the taxes imposed by this Article do not apply to food. The tax does apply to all of the following:
(1)	Candy.
(2)	Dietary supplements.
(3)	Prepared foods.
(4)	Food sold through a vending machine.
(5)	Soft drinks."
SECTION 2.10.  Subdivision 5(b)(5) of Part IV of Chapter 903 of the 1983 Session Laws, as amended by Chapter 821 of the 1989 Session Laws, reads as rewritten:
"(b)	Definitions. The definitions in G.S. 105‑164.3 apply to this Part insofar as they are not inconsistent with the provisions of this Part. In addition, the following definitions apply in this Part:
….
(5)	Prepared Food and Beverages. The term has the same meaning as the term "prepared food" in G.S. 105-164.3."
SECTION 2.11.  Subdivision 2(a)(2) of Chapter 413 of the 1993 Session Laws reads as rewritten:
"Sec. 2.  Definitions; Sales and Use Tax Statutes. – (a)  The definitions in G.S. 105‑164.3 apply to this act to the extent they are not inconsistent with the provisions of this act.  In addition, the following definitions apply in this act:
….
(2)	Prepared food and beverages. – The term has the same meaning as the term "prepared food" in G.S. 105-164.3."
SECTION 2.12.  Section 2 of Chapter 449 of the 1985 Session Laws, as amended by Chapter 826 of the 1985 Session Laws and Chapter 177 of the 1991 Session Laws, reads as rewritten:
"Sec. 2. Definitions. The definitions in G.S. 105‑164.3 apply in this act. In addition, the following definitions apply in this act.
(1)	Net proceeds. Gross proceeds less the cost to the county of administering and collecting the tax.
(2)	Prepared food and beverages. The term has the same meaning as the term "prepared food" in G.S. 105-164.3."
SECTION 2.13.  Subsection 1(b) of Chapter 449 of the 1993 Session Laws reads as rewritten:
"(b)	Definitions; Sales and Use Tax Statutes. – The definitions in G.S. 105‑164.3 apply to this section to the extent they are not inconsistent with the provisions of this section. In addition, the term "prepared food and beverages"has the same meaning as the term "prepared food" in G.S. 105-164.3. The provisions of Article 5 and Article 9 of Chapter 105 of the General Statutes apply to this section to the extent they are not inconsistent with the provisions of this section."
SECTION 2.14.  Subdivision 2(3) of Chapter 594 of the 1991 Session Laws reads as rewritten:
"Sec. 2.  Definitions.  The definitions in G.S. 105‑164.3 apply to this act to the extent they are not inconsistent with the provisions of this act.  The following definitions also apply in this act:
….
(3)	Prepared food and beverage. The term has the same meaning as the term "prepared food" in G.S. 105-164.3."

PART 3. EFFECTIVE DATES

SECTION 3.1.  Part 1 of this act is effective when it becomes law.
SECTION 3.2.  Part 2 of this act becomes effective January 1, 2002, if the Streamlined Sales and Use Tax Agreement becomes effective before August 1, 2001.  If the Agreement does not become effective before August 1, 2001, Part 2 becomes effective on the first day of the fourth month after the Agreement does become effective.  The Secretary of Revenue must notify the codifier of the statutes when the Agreement becomes effective.
SECTION 3.3.  The remainder of this act is effective when it becomes law.