Membership of streamlined sales tax governing board

# 1.

The tax commissioner or the commissioner's designee;

# 2.

One member appointed by the majority leader of the senate; and

# 3.

One member appointed by the majority leader of the house of representatives.
57-39.4-32. (330) Bundled transactions.
1. A member state shall adopt, and utilize to determine tax treatment, the core definition for a "bundled transaction" in the agreement.
2. Member states are not restricted in their tax treatment of bundled transactions except as otherwise provided in the agreement. Member states are not restricted in their ability to treat some bundled transactions differently from other bundled transactions.
3. In the case of a bundled transaction that includes telecommunications service, ancillary service, internet access, or audioprogramming or videoprogramming service:
a. If the price is attributable to products that are taxable and products that are nontaxable, the portion of the price attributable to the nontaxable products may be subject to tax unless the provider can identify by reasonable and verifiable standards such portion from its books and records that are kept in the regular course of business for other purposes, including, but not limited to, nontax purposes.
b. If the price is attributable to products that are subject to tax at different tax rates, the total price may be treated as attributable to the products subject to tax at the highest tax rate unless the provider can identify by reasonable and verifiable standards the portion of the price attributable to the products subject to tax at the lower rate from its books and records that are kept in the regular course of business for other purposes, including, but not limited to, nontax purposes.
c. The provisions of this section shall apply unless otherwise provided by federal law.

# 4.

In the case of a transaction that includes an "optional computer software maintenance contract" for prewritten computer software and the state otherwise has not specifically imposed tax on the retail sale of computer software maintenance contracts, the following provisions apply:
a. If an optional computer software maintenance contract only obligates the vendor to provide upgrades and updates, it will be characterized as a sale of prewritten computer software.
b. If an optional computer software maintenance contract only obligates the vendor to provide support services, it will be characterized as a sale of services.
c. If an optional computer software maintenance contract is a bundled transaction in which both taxable and nontaxable or exempt products that are not separately itemized on the invoice or similar billing document, the contract shall be characterized as all taxable.
57-39.4-33. (331) Relief from certain liability for purchasers.
1. A member state shall relieve a purchaser from liability for penalty to that member state and its local jurisdictions for having failed to pay the correct amount of sales or use tax in the following circumstances:
a. A purchaser's seller or certified service provider relied on erroneous data provided by that member state on tax rates, boundaries, taxing jurisdiction assignments, or in the taxability matrix completed under section 57-39.4-29.
b. A purchaser holding a direct pay permit relied on erroneous data provided by that member state on tax rates, boundaries, taxing jurisdiction assignments, or in the taxability matrix completed by that member state under section 57-39.4-29.
c. A purchaser relied on erroneous data provided by that member state in the taxability matrix completed by that member state under section 57-39.4-29.
d. A purchaser using databases under subsections 6, 7, and 8 of section 57-39.4-06 relied on erroneous data provided by that member state on tax rates, boundaries, or taxing jurisdiction assignments. After providing adequate notice as determined by the governing board, a member state that provides an address-based database for assigning taxing jurisdictions under subsection 7 or 8 of section 57-39.4-06 may cease providing liability relief for errors resulting from the reliance on the database provided by the member state under the provisions of subsection 6 of section 57-39.4-06.
2. Except when prohibited by a member state's constitution, a member state shall also relieve a purchaser from liability for tax and interest to that member state and its local jurisdictions for having failed to pay the correct amount of sales or use tax in the circumstances described in subsection 1, provided that with respect to reliance on the taxability matrix completed by that member state under section 57-39.4-29, such relief is limited to the state's erroneous classification in the taxability matrix of terms included in the agreement as "taxable", "exempt", "included in sales price", "excluded from sales price", "included in the definition", or "excluded from the definition".
3. For purposes of this section, the term "penalty" means an amount imposed for noncompliance that is not fraudulent, willful, or intentional which is in addition to the correct amount of sales or use tax and interest.
4. A member state may allow relief on terms and conditions more favorable to a purchaser than the terms required by this section.
57-39.4-33.1. (332) Specified digital products.
1. A member state shall not include "specified digital products", "digital audiovisual works", "digital audio works", or "digital books" within its definition of "ancillary services", "computer software", "telecommunication services", or "tangible personal property". This restriction applies whether the "specified digital product" is sold to a purchaser who is an end user or to a purchaser with less than the right of permanent use granted by the seller, or use by the purchaser which is conditioned upon continued payment from the purchaser. Until January 1, 2010, the exclusion of "specified digital products" from the definition of "tangible personal property" does not affect the classification of products transferred electronically that are not included within the definition of "specified digital products" as being included in, or excluded from, the definition of "tangible personal property".
2. For purposes of subsection 3 of section 57-39.4-28 and the taxability matrix, "digital audiovisual works", "digital audio works", and "digital books" are separate definitions.
3. If a state imposes a sales or use tax on products transferred electronically separately from its imposition of tax on "tangible personal property", the state will not be required to use the terms "specified digital product", "digital audiovisual works", "digital audio works", or "digital books", or enact an additional or separate sales or use tax on any "specified digital product".
4. For purposes of the agreement:
a. A statute imposing a tax on "specified digital products", "digital audiovisual works", "digital audio works", or "digital books" and, after January 1, 2010, a tax on any other product transferred electronically must be construed as only imposing the tax on a sale to a purchaser who is an end user unless the statute specifically imposes and separately enumerates the tax on a sale to a purchaser who is not an end user. For purposes of this section, an "end user" includes any person other than a person who receives by contract a product transferred electronically for further commercial broadcast, rebroadcast, transmission, retransmission, licensing, relicensing, distribution, redistribution, or exhibition of the product, in whole or in part, to another person or persons. A person who purchases products transferred electronically, or the code for specified digital products for the purpose of giving away such products or code shall not be considered to have engaged in the distribution or redistribution of such products or code and shall be treated as an end user.
b. A statute imposing a tax on "specified digital products", "digital audiovisual works", "digital audio works", or "digital books" and, after January 1, 2010, on any other product transferred electronically must be construed as only imposing tax on a sale with the right of permanent use granted by the seller unless the statute specifically imposes and separately enumerates the tax on a sale with the right of less than permanent use granted by the seller. For purposes of this section "permanent" means perpetual or for an indefinite or unspecified length of time. A right of permanent use shall be presumed to have been granted unless the agreement between the seller and the purchaser specifies or the circumstances surrounding the transaction suggest or indicate that the right to use terminates on the occurrence of a condition subsequent.
c. A statute imposing a tax on "specified digital products", "digital audiovisual works", "digital audio works", or "digital books" and, after January 1, 2010, on any other product transferred electronically shall be construed as only imposing tax on a sale which is not conditioned upon continued payment from the purchaser unless the statute specifically imposes and separately enumerates the tax on a sale which is conditioned upon continued payment from the purchaser.
d. A member state which imposes a sales or use tax on the sale of a product transferred electronically to a person other than the end user or on a sale with the right of less than permanent use granted by the seller or which is conditioned upon continued payment from the purchaser shall so indicate in its taxability matrix in a format approved by the governing board.

# 5.

Nothing in this section or the definition of "specified digital products" shall limit a state's right to impose a sales or use tax or exempt from sales or use tax any products or services that are outside the definition of "specified digital products".

# 6.

A state may treat a subscription to products transferred electronically differently than a nonsubscription purchase of such product. For purposes of this section, "subscription"
means an agreement with a seller that grants a consumer the right to obtain products transferred electronically from within one or more product categories having the same tax treatment, in a fixed quantity or for a fixed period of time, or both.

# 7.

The tax treatment of a "digital code" shall be the same as the tax treatment of the "specified digital product" or product transferred electronically to which the "digital code" relates. The retail sale of the "digital code" shall be considered the transaction for purposes of the agreement. For purposes of this section, "digital code" means a code, which provides a purchaser with a right to obtain one or more such products having the same tax treatment. A "digital code" may be obtained by any means, including electronic mail or by tangible means regardless of its designation as "song code", "video code", or "book code".

# 8.

Notwithstanding the provisions of section 57-39.4-17, a member state may provide a product-based exemption for specific items within the definition of "specified digital products", provided the items which are not transferred electronically must also be granted a product-based exemption by the member state.

# 9.

For purposes of this section and section 57-39.4-33.2, the term "transferred electronically" means obtained by the purchaser by means other than tangible storage media.
57-39.4-33.2. (333) Use of specified digital products.
A member state shall not include any product transferred electronically in its definition of "tangible personal property". "Ancillary services", "computer software", and "telecommunication services" are excluded from the phrase "products transferred electronically".
57-39.4-33.3. (334) Replacement tax prohibited.
No member state may have a prohibited replacement tax on any product defined in part II or part III(B) of the library of definitions which has the effect of avoiding the intent of this agreement.
57-39.4-33.4. (335) Tax administration practices.
1. For purposes of this section, tax administration practices consist of the following:
a. "Disclosed practice", which means a tax practice that the governing board selects and requires each member state to disclose under subsection 2; and b. "Best practice", which means is a disclosed practice selected by the governing board as a best practice under subsection 3.
2. The governing board shall select a disclosed practice using the following procedures:
a. The state and local advisory council shall develop a practice for disclosure under the guidelines set forth in governing board rule 335.
b. The governing board shall provide public notice and opportunity for comment prior to voting on a motion to approve selection of a tax practice for disclosure.
c. If a disclosed practice and a best practice are under concurrent development under rule 335, the governing board first shall vote on whether the practice is a disclosed practice before proceeding on a vote on whether the practice should be selected as a best practice.
d. A majority vote of the entire governing board is required to approve a motion to select a tax practice for disclosure.
3. The governing board shall select a best practice using the following procedures:
a. The state and local advisory council shall develop a best practice under the guidelines set forth in governing board rule 335 only from among the disclosed practices or from tax practices in concurrent development under subsection 2.
b. The governing board shall provide notice and opportunity for public comment before voting on a motion to approve selection of a best practice.
c. A three-fourths vote of the entire governing board is required to approve a motion to select a best practice.
4. Tax administration practices must be maintained in an appendix to the agreement.
5. A state may not be found to be out of compliance with the agreement because the effect of the state's laws, rules, regulations, and policies do not follow a tax administration practice. Following a tax administration practice is voluntary. All member states are encouraged to follow each best practice.
6. Each state shall complete and submit to the executive director for posting on the governing board's website the tax administration practices section of the taxability matrix by the first day of the calendar month which is at least sixty days after the date the governing board approves a motion to select a disclosed or best practice, or both, or the date specified by the governing board, whichever is later.
7. Using the procedure for updating the taxability matrix, the executive director shall make the necessary updates to the taxability matrix template no later than thirty days after the date the governing board approves a motion to select a disclosed or best practice.
8. All best practices existing on May 11, 2015, are disclosed practices. The executive director shall implement this provision without changing any of the member states' responses.
9. A disclosed practice may subsequently be modified or become a best practice by following the provisions set forth in this section.
57-39.4-34. (501) Certification of service providers and automated systems.
1. The governing board shall certify automated systems and service providers to aid in the administration of sales and use tax collections.
2. The governing board may certify a person as a certified service provider if the person meets all of the following requirements:
a. The person uses a certified automated system;
b. The person integrates its certified automated system with the system of a seller for whom the person collects tax so that the tax due on a sale is determined at the time of the sale;
c. The person agrees to remit the taxes it collects at the time and in the manner specified by the member states;
d. The person agrees to file returns on behalf of the sellers for whom it collects tax;
e. The person agrees to protect the privacy of tax information it obtains in accordance with section 57-39.4-22; and f. The person enters into a contract with the member states and agrees to comply with the terms of the contract.
3. The governing board may certify a software program as a certified automated system if the governing board determines that the program meets all of the following requirements:
a. It determines the applicable state and local sales and use tax rate for a transaction, in accordance with sections 57-39.4-10 through 57-39.4-17, inclusive;
b. It determines whether an item is exempt from tax;
c. It determines the amount of tax to be remitted for each taxpayer for a reporting period;
d. It can generate reports and returns as required by the governing board; and e. It can meet any other requirement set by the governing board.
The governing board may establish one or more sales tax performance standards for model 3 sellers that meet the eligibility criteria set by the governing board and that developed a proprietary system to determine the amount of sales and use tax due on transactions.
57-39.4-35. (502) State review and approval of certified automated system software and certain liability relief.
1. Each member state shall review software submitted to the governing board for certification as a certified automated system as provided for in this chapter. Such review shall include a review to determine that the program accurately reflects the taxability of the product categories included in the program. Upon approval by the state, the state shall certify to the governing board its acceptance of the system determination of the taxability of the product categories included in the program.
2. Each member state shall relieve certified service providers and model 2 sellers from liability to the member state and local jurisdictions for not collecting sales or use taxes resulting from the certified service provider or model 2 seller relying on the certification provided by the member state.
3. Each member state shall provide relief from liability to certified service providers for not collecting sales and use taxes in the same manner as provided to sellers under the provisions of section 57-39.4-18.
4. The governing board and the member states shall not be responsible for classification of an item or transaction within the product categories certified. The relief from liability provided in this section shall not be available for a certified service provider or model 2 seller that has incorrectly classified an item or transaction into a product category certified by a member state. This subsection shall not apply to the individual listing of items or transactions within a product definition approved by the governing board or the member states.
5. If a member state determines that an item or transaction is incorrectly classified as to its taxability, it shall notify the certified service provider or model 2 seller of the incorrect classification. The certified service provider or model 2 seller shall have ten days to revise the classification after receipt of notice from the member state of the determination. Upon expiration of the ten days, the certified service provider or model 2 seller shall be liable for the failure to collect the correct amount of sales or use taxes due and owing to the member state.
6. For purposes of this section:
a. "Certify a product category" means the state reviews the product category and determines that the taxability of a product properly included in that product category is consistent with that state's laws. The state certifies that the taxability is based only on:

(1) The product-based exemptions or impositions provided by state law;

(2) The specific description provided by the seller or certified service provider;
and

(3) Not requiring either the purchaser or seller to produce documentation to claim the exemption.
b. (1) "Product category" means:

(a) Terms specifically defined in appendix C, part II or part III of the agreement, such as clothing, durable medical equipment, food, drugs, soft drinks, and disaster preparedness supplies;

(b) Subcategories of terms specifically defined in subparagraph a that may be taxed differently than the product category as a whole, such as oxygen delivery equipment, kidney dialysis equipment, prewritten computer software delivered electronically, and prepared food that requires additional cooking by the consumer;

(c) Terms representing groups of like products that do not fall within subparagraph a or b, such as other digital products, building materials, furniture, or motor vehicles; and

(d) Subcategories of subparagraph c that are taxed differently than the product category as a whole, such as printed materials, newspapers, and catalogs.

(2) The term does not include any individual product that properly falls within any product category in a state, such as shirts, reusable thermometers, ultrasound machines, bread, tables, chairs, automobiles, or motorcycles, unless the individual product is taxed differently than any other products within that product category; or "tangible personal property".