Brief ⁽¹⁾

SB 1 would provide a system for taxing bundled telecommunications services. Under this bill, a retailer with the ability to break down the cost of bundled telecommunications services would remit tax for only those services which are taxable. If the retailer's bookkeeping system does not allow for a breakdown of the cost of taxable and nontaxable services, then the combined cost would be deemed to be attributable to the taxable services and, as such, the combined total would be taxed.

SB 1 would place the burden of proving that a receipt or charge is not taxable on the telecommunications retailer. The bill would also provide that upon request from the customer, the retailer would be required to disclose the selling price of taxable services (if a breakdown is provided) and of taxable and non-taxable services (if billed on a combined basis).

SB 1 would also require that such retailers offering taxable and nontaxable bundled services enter into a written agreement with the Secretary of Revenue identifying the records to be used in determining the taxable portion of the selling price of the combined services within 90 days of billing.

Background

SB 1 was introduced by the Special Committee on Assessment and Taxation after an interim study of the issue of taxing bundled telecommunications services.

The Senate Committee held a hearing on SB 1, at which time representatives of AT&T, Sprint, and SBC Communications testified in favor of the bill. They noted that the services provided by the telecommunications industry are expanding and that the advent of "bundling," or providing multiple telecommunications services for a fixed price, is a departure from the traditional usage-based pricing system. As a result, the bundled services do not fit in the current system of taxing telecommunications.

The Senate Committee amended the bill at the request of the Department of Revenue to include the provision requiring that retailers offering taxable and nontaxable bundled services enter into a written agreement with the Secretary of Revenue identifying the records to be used in determining the taxable portion of the selling price of the combined services prior to billing.

The House Committee amended the bill at the request of the telecommunications industry and the Department of Revenue to allow retailers offering taxable and nontaxable bundled services to enter into a written agreement with the Secretary of Revenue identifying the records to be used in determining the taxable portion of the selling price of the combined services within 90 days of billing, as opposed to prior to billing under the Senate Committee version of the bill.

The Division of the Budget reports that passage of SB 1 would result in the loss of any potential sales tax receipts from taxing all services included in a "bundle."

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext.cgi