lined Sales Tax Project is working with the telecommunications industry on uniform provisions for sourcing as well as refund limitation provisions based upon the hold harmless provisions in the federal Mobile Telecommunications Sourcing Act. The Streamlined Sales Tax Project and the implementing states5 have adopted principles for sourcing. The principles do not differ from North Carolina's current sourcing principles. This act codifies those principles. The Streamlined Sales Tax Project has not yet completed its work on the refund limitation provisions. Since North Carolina does not have multiple 2 The Multi-State Tax Commission and the Federation of Tax Administrators are currently involved in a project to specify the format of the database. 3 Some states allow local governments to impose a tax on telecommunications services, resulting in multiple taxing jurisdictions within a state. 4 The level of accuracy for the nine-digit zip code ranges from 85% to 99%. A more accurate system may be developed using a geographic mapping system. The federal law gives each state the ability to develop a more accurate system if it so chooses. 5 There are 27 states that have enacted legislation based on either the Uniform Sales and Use Tax Administration Act or the Simplified Sales and Use Tax Administration Act: AR, FL, IL, IN, KY, LA, ME, MD, MI, MN, NE, NV, NJ, NC, ND, OH, OK, RI, SD, TN, TX, UT, WA, WI, WV, WY, and the District of Columbia. - 3 - taxing jurisdictions6, it does not currently need these provisions. Therefore, this act does not include any provisions on this issue. SECTION-BY-SECTION ANALYSIS: This act conforms North Carolina's sourcing of mobile telecommunications to the federal Mobile Telecommunications Sourcing Act and codifies the sourcing principles adopted by the Streamlined Sales Tax Project and the 27 implementing states, as follows: Sections 1, 3, and 15: Replace the term "service address" and "billing address" with the term "place of primary use" because that is the terminology used in the federal Mobile Telecommunications Sourcing Act. Sections 2, 8, 12, and 13: Change the term "prepaid telephone calling arrangement" to the term "prepaid telephone calling service" so that the terminology is consistent with the other forms of telecommunication services. Sections 4 and 5: Prepaid telephone calling services are taxed as tangible personal property, not as a telecommunications service. Section 4 removes the sourcing language from the statute that sets the sales tax rates and Section 5 modifies the sourcing principles that apply to tangible personal property to accommodate the taxation of prepaid telephone calling services. Section 6: Deletes the sentence that sources mobile telecommunications based on the call originating or terminating in this State because it conflicts with the sourcing principle in the federal Mobile Telecommunications Sourcing Act. It also specifies that mobile telecommunications services are taxed in accordance with federal law. This reference alerts the reader that there is applicable federal law on this issue. Sections 7 and 11: Under the federal Mobile Telecommunications Sourcing Act and the Streamlined Sales Tax Project, telecommunications service is sourced based on the type of service provided rather than the type of call. These sections define the different types of services and repeal the terms associated with the types of calls. Sections 9 and 10: Set forth the mobile telecommunications sourcing principle in the federal Mobile Telecommunications Sourcing Act, and codify the principles currently used by the State to source other telecommunications services. Section 10 rewrites the sourcing principles for private telecommunications service in a more understandable format and adds a sourcing principle that is not currently applicable to private lines in the State, but may be 6 North Carolina distributes a portion of the State-imposed telecommunications tax to the cities. - 4 - applicable in the future. The principles codified are the same principles adopted by the Streamlined Sales Tax Project and the implementing states in March of 2002. Under the act, at the request of the telecommunications industry, the new sourcing principle applicable to private telecommunications service does not become effective until January 1, 2004. Sections 9 and 14: Under the Streamlined Sales Tax Project, postpaid calling service will be sourced based on the origination point of the telecommunications signal as first identified by the seller's telecommunications system. However, not every company in the telecommunications industry has the capability to determine the origination point of the signal. The act gives the seller two options to source postpaid calling service until 2004; beginning in 2004, the seller must source based on the origination point of the telecommunications signal. Certain Counties Delinquent Taxes Session Law Bill # Sponsor S.L. 2002-51 HB 1533 Representative Hunter AN ACT TO AUTHORIZE CERTAIN COUNTIES TO REQUIRE THE PAYMENT OF DELINQUENT PROPERTY TAXES BEFORE RECORDING DEEDS CONVEYING PROPERTY AND TO MODIFY THE TIMETABLE FOR STOKES COUNTY OR ANY OF ITS MUNICIPALITIES TO ADOPT A SCHEDULE OF DISCOUNTS FOR PREPAYMENT OF PROPERTY TAXES. OVERVIEW: S.L. 2002-51 authorizes the county commissioners in Bertie, Clay, Durham, Henderson, Hertford, Macon, Northampton, Polk, Rutherford, and Transylvania Counties to require the register of deeds to refuse to register a deed unless the county tax collector has certified that no delinquent taxes are due on the property. In addition, this act allows the governing body of Stokes County or any of its municipalities to provide a schedule of discounts for property taxes paid prior to November 1, 2002. FISCAL IMPACT: This act has no impact on the General Fund. EFFECTIVE DATE: This act became effective when it became law, July 30, 2002. ANALYSIS: Since 1963, the General Assembly has prohibited the register of deeds in several counties and municipalities from recording deeds unless the tax collector certifies that no delinquent taxes are due: Avery County (1963); Mitchell County (1987); Ashe County (1993); the Towns of Newland and Spruce Pine and Alleghany County (1997); the Town of Banner Elk (1998); and the Town of Bakersville (1999). - 5 - In 2001, the General Assembly gave the county commissioners in 35 counties the authority to adopt a resolution requiring the county tax collector to certify that no delinquent taxes the collector is charged to collect are due on the property before a deed transferring the property can be recorded. S.L. 2001-464 gave this authority to the following 25 counties: Alleghany, Anson, Beaufort, Cabarrus, Camden, Cherokee, Chowan, Currituck, Forsyth, Graham, Granville, Harnett, Haywood, Jackson, Lee, Madison, Montgomery, Pasquotank, Perquimans, Pitt, Stanley, Swain, Vance, Warren, and Yadkin Counties. S.L. 2001-513 gave this authority to the following 10 counties: Carteret, Cleveland, Davidson, Gaston, Iredell, Martin, Person, Rockingham, Rowan, and Washington Counties. Unlike the previous local acts, the authority given by these two 2001 acts is permissive. To use this collection tool, the board of county commissioners must adopt a resolution on the matter. The resolution may describe the form the certification must take. S.L. 2002-51 extends to the following 10 counties the permissive authority given to the 35 counties in 2001: Bertie, Clay, Durham, Henderson, Hertford, Macon, Northampton, Polk, Rutherford, and Transylvania Counties. In addition, S.L. 2002-51 allows Stokes County and it municipalities to institute, without the approval of the Department of Revenue, a schedule of discounts to be applied to property taxes paid prior to November 1, 2002. The governing body that adopts the resolution must submit a certified copy to the Department of Revenue and must publish the discount schedule at least once in a newspaper of general circulation in the taxing unit. In general, under G.S. 105-360(c), a county or municipality that levies a property tax may adopt a resolution or ordinance to establish a schedule of discounts for taxes paid prior to the due date. In order to exercise this authority, the county or municipality must 1) adopt the resolution or ordinance specifying the schedule of discounts prior to May 1, 2) submit the resolution or ordinance to the Department of Revenue for approval, and 3) upon approval of the resolution or ordinance, publish the discount schedule at least once in a newspaper of general circulation in the taxing unit. Revenue Laws Technical Changes Session Law Bill # Sponsor S.L. 2002-72 SB 1160 Senator Hartsell AN ACT TO MAKE TECHNICAL AND CLARIFYING CHANGES TO THE REVENUE LAWS AND RELATED STATUTES AND TO PROVIDE A ONE-TIME EXTENSION TO THE TIME PERIOD IN WHICH A TAXPAYER MAY SIGN A LETTER OF COMMITMENT WITH THE DEPARTMENT OF COMMERCE TO QUALIFY FOR A LOWER TIER DESIGNATION. OVERVIEW: Senate Bill 1160 makes numerous technical and clarifying changes to the revenue laws and related statutes. It also makes one substantive change. The original bill was a recommendation of the Revenue Laws Study Committee. - 6 - FISCAL IMPACT: Section 1 of this act, which allows a one-time exception to the requirement that a letter of commitment be signed before year's end, has an annual cost to the General Fund of $725,000 through the 2006-2007 fiscal year and an annual cost of $25,000 for three years thereafter. The remainder of this act has no fiscal impact. EFFECTIVE DATE: Except for Section 9 of the bill, which conforms the payment date for the insurance regulatory charge on HMOs