Legislature(2001 - 2002)

04/08/2002 01:40 PM Senate CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
              HB 355-MOBILE TELECOMMUNICATIONS TAX                                                                          
                                                                                                                                
AMY  ERICKSON, staff  to Representative  Murkowski  and the  House                                                              
Labor and Commerce Committee, read  the following into the record:                                                              
                                                                                                                                
     HB 355 is  the mobile telecommunications tax.  State and                                                                   
     local governments tax mobile  telecommunication services                                                                   
     in  a  variety  of  ways. Because  of  the  mobility  of                                                                   
     wireless  equipment determining  which  state and  local                                                                   
     taxes  apply  to a  wireless  call is  complicated.  The                                                                   
     process  of  determining wire  transaction  is  commonly                                                                   
     referred  to as  sourcing.  In order  to  create a  more                                                                   
     uniform  system  for  taxing  wireless  calls,  Congress                                                                   
     passed the  Mobile Communication  Sourcing Act  in 2000.                                                                   
     States  have until  August  1, 2002  to  conform to  the                                                                   
     federal  act  and  those  failing  to  conform  will  be                                                                   
     preempted  from  imposing  taxes   on  most  calls  made                                                                   
     outside of where the customer's  primary use occurs, so-                                                                   
     called roaming calls.                                                                                                      
                                                                                                                                
     This bill conforms  state law to federal  law to clarify                                                                   
     that mobile  telecommunications services are  subject to                                                                   
     taxation in the users place  of primary use. That is the                                                                   
     residential  or business  address  where the  customer's                                                                   
     use of the  mobile service primarily occurs.  Passage of                                                                   
     this  bill  prevents  multiply   taxation  of  services,                                                                   
     allows  the state  to appropriately  tax wireless  calls                                                                   
     and  eliminates  confusion   as  to  where  to  tax  the                                                                   
     wireless  calls. The bill  does not  impact the rate  of                                                                   
     taxes  or  fees that  state's  or localities  impose  on                                                                   
     wireless calls  or the types of calls subject  to taxes.                                                                   
     Each jurisdiction  with taxing  authority will  continue                                                                   
     to determine whether to tax a call and at what rate.                                                                       
                                                                                                                                
     The Mobile  Telecommunication  Sourcing Act was  crafted                                                                   
     by  industry,  state, local  and  tax officials  and  is                                                                   
     endorsed  by such  entities  as the  National  Governors                                                                   
     Association,  League  of  Cities, and  the  Federal  Tax                                                                   
     Administration.                                                                                                            
                                                                                                                                
                                                                                                                                
SENATOR PHILLIPS asked  Ms. Erickson if she knew  why the Governor                                                              
from Montana vetoed the legislation.                                                                                            
                                                                                                                                
MS.  ERICKSON  replied  she  didn't know  the  reason  but  either                                                              
Darrell Bell or Dan Youmans from AT&T Wireless probably would.                                                                  
                                                                                                                                
DARRELL  BELL responded  via teleconference  and said the  Montana                                                              
Governor ran  for election on a  strict no new taxes  campaign and                                                              
she believed  some might view  her as supporting  additional taxes                                                              
if she signed the bill.                                                                                                         
                                                                                                                                
SENATOR PHILLIPS asked how the law  is currently being enforced in                                                              
Alaska or any other state.                                                                                                      
                                                                                                                                
MR. BELL explained  that the service carrier that  is handling the                                                              
roaming activity is  applying the taxes where they  have roamed to                                                              
and remitting  them to  the local  governments. Those charges  are                                                              
then passed  on to  the home  carrier who  collects them  from the                                                              
customer. States applying the federal  law will forgo revenue from                                                              
taxes on calls made within their  state by visitors, but will gain                                                              
authority to tax calls made by residents  while out-of-state. This                                                              
makes administration of the taxes  much simpler and on a state-by-                                                              
state basis should be revenue neutral.                                                                                          
                                                                                                                                
He added  about 30  states have passes  conforming language  bills                                                              
and Montana is the only state that has had a problem.                                                                           
                                                                                                                                
CHAIRMAN TORGERSON  asked where his  charges would be taxed  if he                                                              
traveled to Washington and made roaming calls.                                                                                  
                                                                                                                                
MR. BELL explained if he went to  Seattle, Washington and placed a                                                              
call today, the  State of Washington would impose  a sales tax and                                                              
the city of  Seattle would impose  both a sales tax and  a utility                                                              
tax. The  serving carrier would remit  the taxes locally  and then                                                              
pass them on  to the home carrier  who would then apply  the taxes                                                              
to his bill.  The charges might  be buried in the  roaming charges                                                              
but they  would likely be  there. Under  this bill, all  the calls                                                              
would be taxed  to the primary-use taxing jurisdiction.  No longer                                                              
would they be taxing people that roam into the state.                                                                           
                                                                                                                                
CHAIRMAN TORGERSON asked how it could be revenue neutral.                                                                       
                                                                                                                                
MR.  BELL said  the  same amount  of revenue  would  be lost  from                                                              
customers  roaming into  Alaska as  would be  gained by  customers                                                              
from Alaska  roaming outside the  state. Another part of  the bill                                                              
is that either  the state provides a database or  the carrier uses                                                              
a  nine digit  zip code  identification  to enter  users into  the                                                              
correct jurisdiction.  Additionally, if  a customer  believes they                                                              
are being  taxed to  the incorrect  jurisdiction the home  carrier                                                              
must  respond to  the  complaint  within 60  days  to correct  the                                                              
error.                                                                                                                          
                                                                                                                                
States that don't  pass this type of legislation  before August 1,                                                              
2002 will lose  money because they  will no longer be able  to tax                                                              
individuals that roam into the state  but have primary use outside                                                              
the state.                                                                                                                      
                                                                                                                                
CHAIRMAN TORGERSON  asked for confirmation that the  bill would be                                                              
revenue neutral.                                                                                                                
                                                                                                                                
CHUCK  HARLAMERT, Department  of Revenue  representative, said  at                                                              
present only  local governments impose  taxes on the  revenues and                                                              
the bill  should be revenue  neutral in  Alaska. It's a  good bill                                                              
and  the  state  should  take every  opportunity  allowed  by  the                                                              
federal government.                                                                                                             
                                                                                                                                
SENATOR PHILLIPS made a motion to  move CSHB 355(CRA) and attached                                                              
fiscal note from committee with individual recommendations.                                                                     
                                                                                                                                
There being no objection, it was so ordered.                                                                                    

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