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Sponsor Statement for SB 314
Mobile Telecommunications Tax

An Act relating to the taxation of mobile telecommunications services by municipalities; and providing for an effective date.

State and local governments tax mobile telecommunications services in a variety of ways. Due to the mobility of wireless equipment, determining which state and local taxes apply to a wireless call is complicated. The process of determining where a transaction is taxable is commonly referred to as "sourcing." There are several methods of sourcing wireless calls, including using the location of the originating cell site, the billing address or the switch that processes the call. However, the different sourcing methods can give rise to multiple claims on the same tax revenue.

In order to create a more uniform system for taxing wireless telecommunications, in July 2000, Congress enacted the federal Mobile Telecommunications Sourcing Act. The new federal law requires that all charges for mobile telecommunications services must be sourced to the customer's "primary place of use." The federal law defines "primary place of use" as either the residential or primary business street address of the customer within the licensed service area of the provider.

States now have until August 1, 2002 to conform their laws applicable to the taxation of wireless telecommunications to the provisions of federal law. States that fail to act by that time are preempted from imposing taxes on most calls made outside of the state where the customer's primary use occurs (so-called "roaming").

The Mobile Telecommunications Sourcing Act does not impact the rate of taxes or fees that states and localities impose on wireless calls or the types of calls that are subject to such taxes. It only determines which jurisdiction has the authority to tax a wireless call. Each jurisdiction with legal taxing authority will continue to determine whether to tax such calls and at what rate.

Senate Bill 314 prevents multiple taxation, achieves administrative simplicity and costs savings in the billing process, and avoids expensive audit litigation exposure when multiple state claim jurisdiction to tax the same call.

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