ARTICLE 30 SUBSTITUTE A AS AMENDED

RELATING TO TAXATION

SECTION 1. Section 42-61.2-7 of the general laws in chapter 42-61.2 entitled “Video Lottery Terminal” is hereby amended as follows:

42-61.2-7.  Division of revenue. – (a) Notwithstanding the provisions of § 42-61-15, the allocation of net terminal income derived from video lottery games is as follows:

   (1) For deposit in the general fund and to the state lottery division fund for administrative purposes: Net terminal income not otherwise disbursed in accordance with subdivisions (a)(2)(1) through (a)(6) herein; provided the revenue estimators shall establish at the Revenue Estimating Conferences pursuant to chapter 16 of title 35 the amount of the net terminal income and the state's share of net terminal income that is solely attributable to the introduction of newly authorized machines at Lincoln Park and Newport Grand pursuant to Sections 3 and 4 herein. Said amount shall be distributed as follows:

   (i) 12.50% Nineteen one hundredths of one percent (0.19%) up to a maximum of twenty million dollars ($20,000,000) shall be equally allocated to the distressed communities as defined in § 45-13-12 provided that no eligible community shall receive more than twenty-five percent (25%) of that community's currently enacted municipal budget as its share under this specific subsection. Distributions made under this specific subsection are supplemental to all other distributions made under any portion of general laws § 45-13-12.

   (ii) 3.125% Five one hundredths of one percent (0.05%) up to a maximum of five million dollars ($5,000,000) shall be appropriated to property tax relief to fully fund the provisions of § 44-33-2.1. Once there are sufficient additional funds, the maximum credit defined in subdivision 44-33-9(2) shall increase by increments of fifty dollars ($50.00) until a maximum credit of five hundred dollars ($500) is obtained. The maximum credit defined in subdivision 44-33-9(2) shall increase to the maximum amount to the nearest five dollar ($5.00) increment within the allocation until a maximum credit of five hundred dollars ($500) is obtained. In no event shall the exemption in any fiscal year be less than the prior fiscal year.

   (iii) 78.125% One and twenty-two one hundredths of one percent (1.22%) to fund § 44-34.1-1, entitled "Motor Vehicle and Trailer Excise Tax Elimination Act of 1998", to the maximum amount to the nearest five hundred two hundred fifty dollar ($500) ($250) increment within the allocation. In no event shall the exemption in any fiscal year be less than the prior fiscal year.

   (iv) 6.25% Ten one hundredths of one percent (0.10%) to a maximum of ten million dollars ($10,000,000) for supplemental distribution to communities not included in paragraph (a)(1)(i) above distributed proportionately on the basis of general revenue sharing distributed for that fiscal year.

(v) Any amounts in excess of the limits in (i) through (iv) above shall be allocated to the general fund.

   (2) To the licensed video lottery retailer:

   (a) Prior to the effective date of the NGJA Master Contract, Newport Jai Ali twenty-six percent (26%) minus three hundred eighty four thousand nine hundred ninety-six dollars ($384,996);

   (ii) On and after the effective date of the NGJA Master Contract, to the licensed video lottery retailer who is a party to the NGJA Master Contract, all sums due and payable under said Master Contract minus three hundred eighty four thousand nine hundred ninety-six dollars ($384,996).

   (b) Prior to the effective date of the UTGR Master Contract, to the present licensed video lottery retailer at Lincoln Park which is not a party to the UTGR Master Contract, twenty-eight and eighty-five one hundredths percent (28.85%) minus seven hundred sixty-seven thousand six hundred eighty-seven dollars ($767,687);

   (ii) On and after the effective date of the UTGR Master Contract, to the licensed video lottery retailer who is a party to the UTGR Master Contract, all sums due and payable under said Master Contract minus seven hundred sixty-seven thousand six hundred eighty-seven dollars ($767,687).

   (3) To the technology providers who are not a party to the GTECH Master Contract as set forth and referenced in Public Law 2003, Chapter 32, seven percent (7%) of the net terminal income of the provider's terminals;

   (ii) To contractors who are a party to the Master Contract as set forth and referenced in Public Law 2003, Chapter 32, all sums due and payable under said Master Contract;

   (iii) Notwithstanding subsections (i) and (ii) above, there shall be subtracted proportionately from the payments to technology providers the sum of six hundred twenty-eight thousand seven hundred thirty-seven dollars ($628,737);

   (4) To the city of Newport one and one hundreth percent (1%) (1.01%) plus one quarter percent (0.25%) of net terminal income that is solely attributable to the introduction of newly authorized machines at Newport Grand pursuant to sections 3 and 4 herein as determined by the Revenue Estimating Conference; and to the town of Lincoln one and one quarter twenty-six hundreths percent (1.25%) (1.26%) plus one quarter percent (0.25%) of net terminal income that is solely attributable to the introduction of newly authorized machines at Lincoln Park pursuant to sections 3 and 4 herein as determined by the Revenue Estimating Conference; and

   (5) To the Narragansett Indian Tribe, five seventeen hundredths of one percent (5%) (0.17%) of net terminal income that is solely attributable to the introduction of newly authorized machines at Lincoln Park as determined by the revenue estimators at the Revenue Estimating Conferences pursuant to chapter 16 of title 35 up to a maximum of ten million dollars ($10,000,000) per year, which shall be paid to the Narragansett Indian Tribe for the account of a Tribal Development Fund to be used for the purpose of encouraging and promoting: home ownership and improvement, elderly housing, adult vocational training; health and social services; childcare; natural resource protection; and economic development consistent with state law. Provided, however, such distribution shall terminate upon the opening of any gaming facility in which the Narragansett Indians are entitled to any payments or other incentives; and provided further any monies distributed hereunder shall not be used for, or spent on previously contracted debts.

   (6) Unclaimed prizes and credits shall remit to the general fund of the state;

   (7) Payments into the state's general fund specified in subdivisions (a)(1) and (a)(6) shall be made on an estimated monthly basis. Payment shall be made on the tenth day following the close of the month except for the last month when payment shall be on the last business day.

SECTION 2. Chapter 44-30 of the General Laws entitled "Personal Income Tax" is hereby amended by adding thereto the following section:

44-30-99. Personal income tax law. – (a) The division of taxation shall prepare and submit to the general assembly by October 1, 2006, a Rhode Island personal income tax law which includes tax rates, income brackets, and personal exemptions that are indexed to an inflation factor that relies as little as practical upon references to the United States Internal Revenue Code. The report shall be accompanied with necessary recommended legislation necessary to implement the law. The report and legislation shall be transmitted to the chairperson of the house finance committee and the chairperson of the senate finance committee with copies to the house fiscal advisor and senate fiscal advisor.

SECTION 3. Chapter 44-30 of the General Laws entitled "Personal Income Tax" is hereby amended by adding thereto the following section:

44-30-1.2. Annual Rhode Island personal income and tax data report. -- No later than March 15, the division of taxation shall annually submit a report for the previous calendar year of Rhode Island individual income and tax data by size of adjusted gross income to the chairpersons of the house finance committee and senate finance committee, and the house fiscal advisor and the senate fiscal advisor. The report should be as similar as practical to the individual and income tax data for Rhode Island federal taxpayers issued by the Statistics of Income Division of the Internal Revenue Service.

SECTION 4. Section 44-33-2.1 of the General Laws in Chapter 44-33 entitled "Property Tax Relief" is hereby repealed.

44-33-2.1. Property tax relief. -- (a) A claimant sixty-five (65) years of age or older, and/or disabled during any portion of the year for which the claim was filed shall be paid in full upon receipt of his or her claim for relief under this chapter.

(b) The tax administrator shall not pay any claims to claimants who were under sixty-five (65) years of age or not disabled on the last day of the taxable year for which the claim is made until the total amount of all timely-filed claims has been paid under subsection (a) of this section. The balance of funds appropriated shall be determined as of June 30 annually less the sum of fifty thousand dollars ($50,000) annually for payment of late-filed claims approved by the tax administrator under section 44-33-18.

(c) If insufficient funds exist as of June 30 annually to pay the full amount of all claims of persons under sixty-five (65) years of age and/or not disabled on the last day of the taxable year for which the claim is made, the tax administrator shall make payments to each claimant proportionately. No payment shall exceed one hundred percent (100%) of the amount of the claim.

(d) Late-filed claims approved under section 44-33-18 for claimants sixty-five (65) years of age or older and/or disabled are paid in full upon receipt of his or her claim for relief under this chapter. Late-filed claims approved under section 44-33-18 for claimants under sixty-five (65) years of age and/or not disabled are paid at the same percentage as determined under subsection (c) of this section.

SECTION 5 Section 44-33-9 of the General Laws in Chapter 44-33 entitled "Property Tax Relief" is hereby amended to read as follows:

44-33-9. Computation of credit. -- The amount of any claim made pursuant to this chapter shall be determined as follows: (1) For any taxable year, a claimant is entitled to a credit against his or her tax liability equal to the amount by which the property taxes accrued or rent constituting property taxes accrued upon the claimant's homestead for the taxable year exceeds a certain percentage of the claimant's total household income for that taxable year, which percentage is based upon income level and household size. The credit shall be computed in accordance with the following table:

Income Range 1 Person 2 or More Persons

less than $6000 3% 3%

$6001-9000 4% 4%

$9001-12000 5% 5%

$12001-15000 6% 5%

$15001-30000 6% 6%

(2) The maximum amount of the credit granted under this chapter will be as follows:

Year Credit Maximum

Commencing July 1977 $ 55.00

Commencing July 1978 $150.00

Commencing July 1979 $175.00

Commencing July 1980 $200.00

Commencing on July 1997 $250.00

and subsequent years

Commencing July 2006 $300.00

Commencing July 2007 and subsequent years, the credit shall be increased, at a minimum, to the maximum amount to the nearest five dollar ($5.00) increment within the allocation of five one hundredths of one percent (0.05%) of net terminal income derived from video lottery games up to a maximum of five million dollars ($5,000,000) until a maximum credit of five hundred dollars ($500) is obtained pursuant to the provisions of section 42-61-15. In no event shall the exemption in any fiscal year be less than the prior fiscal year.

SECTION 6 Section 44-30-98 of the General Laws in Chapter 44-30 entitled "Personal Income Tax is hereby amended to read as follows:

44-30-98. Refundable earned income credit. – A taxpayer shall be allowed a credit as provided in § 44-30-2.6(d); provided, however, ten fifteen percent (10%) (15%) of the excess Rhode Island earned income credit will be refunded for the 2005 2006 taxable year and each taxable year thereafter.

SECTION 7. Section 44-30-2.6 of the General Laws in Chapter 44-30 entitled "Personal Income Tax" are hereby amended to read as follows:

44-30-2.6. Rhode Island taxable income -- Rate of tax. -- (a) "Rhode Island taxable income" means federal taxable income as determined under the Internal Revenue Code, 26 U.S.C. section 1 et seq., not including the increase in the basic standard deduction amount for married couples filing joint returns as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003 and the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), and as modified by the modifications in section 44-30-12.

(b) Notwithstanding the provisions of sections 44-30-1 and 44-30-2, for tax years beginning on or after January 1, 2001, a Rhode Island personal income tax is imposed upon the Rhode Island taxable income of residents and nonresidents, including estates and trusts, at the rate of twenty-five and one-half percent (25.5%) for tax year 2001, and twenty-five percent (25%) for tax year 2002 and thereafter of the federal income tax rates, including capital gains rates and any other special rates for other types of income, except as provided in section 44-30-2.7, which were in effect immediately prior to enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA); provided, rate schedules shall be adjusted for inflation by the tax administrator beginning in taxable year 2002 and thereafter in the manner prescribed for adjustment by the commissioner of Internal Revenue in 26 U.S.C. section 1(f). However, for tax years beginning on or after January 1, 2006, a taxpayer may elect to use the alternative flat tax rate provided in section 44-30-2.10 to calculate his or her personal income tax liability.

(c) For tax years beginning on or after January 1, 2001, if a taxpayer has an alternative minimum tax for federal tax purposes, the taxpayer shall determine if he or she has a Rhode Island alternative minimum tax. The Rhode Island alternative minimum tax shall be computed by multiplying the federal tentative minimum tax without allowing for the increased exemptions under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (as redetermined on federal form 6251 Alternative Minimum Tax-Individuals) by twenty-five and one-half percent (25.5%) for tax year 2001, and twenty-five percent (25%) for tax year 2002 and thereafter, and comparing the product to the Rhode Island tax as computed otherwise under this section. The excess shall be the taxpayer's Rhode Island alternative minimum tax.

(d) Credits against tax. - For tax years beginning on or after January 1, 2001, a taxpayer entitled to any of the following federal credits enacted prior to January 1, 1996 shall be entitled to a credit against the Rhode Island tax imposed under this section:

(1) earned income credit;

(2) child and dependent care credit;

(3) general business credits;

(4) foreign tax credit;

(5) credit for elderly or the disabled;

(6) credit for prior year minimum tax;

(7) mortgage interest credit;

(8) empowerment zone employment credit;

(9) qualified electric vehicle credit;

The credit shall be twenty-five and one-half percent (25.5%) of the listed federal credits for tax year 2001, and shall be twenty-five percent (25%) of the aforementioned federal credits for tax year 2002 and thereafter; provided, there shall be no deduction based on any federal credits enacted after January 1, 1996, including the rate reduction credit provided by the federal Economic Growth and Tax Reconciliation Act of 2001 (EGTRRA). In no event shall the tax imposed under this section be reduced to less than zero. A taxpayer required to recapture any of the above credits for federal tax purposes shall determine the Rhode Island amount to be recaptured in the same manner as prescribed in this subsection.

SECTION 8. Chapter 44-30 of the general laws entitled “Personal Income Tax” is hereby amended by adding thereto the following section:

44-30-2.10. Alternative flat tax rate. – (a) For tax years beginning on or after January 1, 2006, a taxpayer may elect to compute his or her Rhode Island personal income tax liability as provided in this section. If no election is made, the taxpayer’s personal income tax liability shall be computed as otherwise provided in this chapter.

(b) For purposes of this section, "alternative Rhode Island taxable income” shall mean federal adjusted gross income as determined for federal income tax purposes as modified by section 44-30-12 and 44-30-32 for residents and nonresidents, respectively. No other state or federal deductions or adjustments to income shall be available to the taxpayer.

(c) For purposes of this section, the “alternative tax rate” shall be eight percent (8.0%) for the tax year 2006; seven and one-half percent (7.5%) for tax year 2007; seven percent (7%) for tax year 2008; six and one-half percent (6.5%) for tax year 2009; six percent (6%) for tax year 2010; and five and one-half percent (5.5%) for tax years 2011 and thereafter;

(d) The alternative personal income tax shall be determined by multiplying the taxpayer’s alternative Rhode Island taxable income by the alternative tax rate, less the following credits:

(1) Credit for income taxes paid to other states as provided for in section 44-30-18;

(2) Credit for Rhode Island personal income tax withheld as provided in section 44-30-74;

(3) Credit for Rhode Island payments of estimated tax as provided in section 44-30-56(e) and RI Reg. Sec. PIT 90-17;

(4) Credit for Rhode Island overpayment of taxes as provided in section 44-30-86(a); and

(5) Credit for Rhode Island amount remitted by a limited liability company on behalf of a nonresident member as provided in section 7-16-73(4).

No other state or federal tax credits shall be available to the taxpayer in computing the alternative personal income tax liability.

(e) The provisions of this section may apply regardless of the taxpayer’s filing status.

SECTION 9. Sections 44-18-6, 44-18-7, 44-18-8, 44-18-12, 44-18-13, 44-18-16, 44-18-17, 44-18-18.1, 44-18-25 and 44-18-30 of the General Laws in Chapter 44-18 entitled “Sales and Use Taxes—Liability and Computation” are hereby amended to read as follows:

44-18-6. Person defined.-- “Person” includes any individual, firm, co‑partnership, joint venture, association, social club, fraternal organization, corporation, estate, trust, business trust, receiver, trustee, assignee, referee, syndicate, the United States, this state, any city, town district or other political subdivision of this state, any individual or group acting in a fiduciary capacity, or any other group or combination acting as a unit. fiduciary, limited liability company, limited liability partnership, or any other legal entity.

44-18-7. Sales Defined -- Additional definitions.—Sales Defined. -- (a) "Hotel" means every building or other structure kept, used, maintained, advertised as or held out to the public to be a place where living quarters are supplied for pay to transient or permanent guests and tenants and includes a motel.

(b) "Living quarters" means sleeping rooms, sleeping or housekeeping accommodations, or any other room or accommodation in any part of the hotel, rooming house or tourist camp which is available for or rented out for hire in the lodging of guests.

(c) "Rooming house" means every house, boat, vehicle, motor court or other structure kept, used, maintained, advertised or held out to the public to be a place where living quarters are supplied for pay to transient or permanent guests or tenants, whether in one or adjoining buildings.

(d) "Sales" means and includes:

(1) Any transfer of title or possession, exchange, barter, lease, or rental, conditional or otherwise, in any manner or by any means of tangible personal property for a consideration. "Transfer of possession," "lease," or "rental" includes transactions found by the tax administrator to be in lieu of a transfer of title, exchange, or barter.

(2) The producing, fabricating, processing, printing, or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing, or imprinting.

(3) The furnishing and distributing of tangible personal property for a consideration by social, athletic, and similar clubs and fraternal organizations to their members or others.

(4) The furnishing, preparing, or serving for a consideration of food, meals, or drinks, including any cover, minimum, entertainment, or other charge in connection therewith.

(5) A transaction whereby the possession of tangible personal property is transferred but the seller retains the title as security for the payment of the price.

(6) Any withdrawal, except a withdrawal pursuant to a transaction in foreign or interstate commerce, of tangible personal property from the place where it is located for delivery to a point in this state for the purpose of the transfer of title or possession, exchange, barter, lease, or rental, conditional or otherwise, in any manner or by any means whatsoever, of the property for a consideration.

(7) A transfer for a consideration of the title or possession of tangible personal property which has been produced, fabricated, or printed to the special order of the customer, or any publication.

(8) The furnishing and distributing of electricity, natural gas, artificial gas, steam, refrigeration, and water.

(9)(i) The furnishing for consideration of telecommunications service which includes local exchange service, intrastate toll service, interstate and international toll service, including cellular mobile telephone or telecommunications service, specialized mobile radio and pagers and paging service including any form of mobile two-way communication, all ancillary services, any maintenance services other than as provided for in §44-18-12(ii)(B) and including the furnishing, rental or leasing of all equipment or services pertaining or incidental thereto, provided such service is: rendered in its entirety within this state, originated in this state and terminated in another state or a foreign country and with respect to which such service is charged to a telephone number, customer or account located in this state or to the account of any transmission instrument in this state, originated in another state or a foreign country and terminated in this state and is charged to a telephone number, customer or account located in this state at which such service is terminated, or to the account of any transmission instrument in this state at which such service is terminated, provided, however, that such service shall not include receipts except as otherwise provided in sections 44-18-8 and 44-18-12.1. Telecommunications service shall not include service rendered using a prepaid telephone calling arrangement.

(ii) Notwithstanding the provisions of subsection (a), in accordance with the Mobile Telecommunications Sourcing Act (4 USC 116-126), subject to the specific exemptions described in 4 USC 116(c), and the exemptions provided in R.I. General Laws sections 44-18-8 and 44-18-12.1, mobile telecommunications services that are deemed to be provided by the customer's home service provider are subject to tax under this chapter if the customer's place of primary use is in this state regardless of where the mobile telecommunications services originate, terminate or pass through. Mobile telecommunications services provided to a customer, the charges for which are billed by or for the customer's home service provider, shall be deemed to be provided by the customer's home service provider. For the purposes of this paragraph:

(A) “Customer” means either (a) a person or entity that contracts with a home service provider for mobile telecommunications service or (b) if the end user of mobile telecommunications services is not the contracting party, the end user of the mobile telecommunication service, but this clause applies only for the purpose of determining the place of determining the place of primary use. Customer does not include a reseller of mobile telecommunications services or a serving carrier that is under an arrangement to serve the customer outside the home service provider’s licensed service area.

(B) “Home service provider” means a facilities-based carrier or reseller with which the customer contracts for the provision of mobile telecommunications services.

(C) “Mobile telecommunications service” means commercial mobile radio service as defined in section 20.3 of title 47 of the Code of Federal Regulations in effect on June 1, 1999.

(D) “Place of primary use” means the street address representative of where the customer’s use of the mobile telecommunications service primarily occurs, which must be:

(I) The residential street address or the primary business street address of the customer; and

(II) Within the licensed service area of the home service provider.

(iii) All other definitions and provisions of the Mobile Telecommunications Act as provided in 4 U.S.C. §§ 116-126 are adopted.

(10) The furnishing of service for transmission of messages by telegraph, cable or radio and the furnishing of community antenna television subscription television and cable television services.

(11) The rental of living quarters in any hotel, rooming house or tourist camp.

(12) The transfer for consideration of prepaid telephone calling arrangements and the recharge of prepaid telephone calling arrangements. If the transfer or recharge of a prepaid telephone calling arrangement does not take place at a vendor's place of business, the transfer or recharge is conclusively determined to take place at the customer's shipping address, or if there is no item shipped, at the customer's billing address or the location associated with the customer's mobile telephone number. "Prepaid telephone calling arrangement" means and includes a prepaid telephone calling card and/or the right to exclusively purchase telecommunications services, that must be paid for in advance, that enables the origination of calls using an access number and/or authorization code, whether manually or electronically dialed.

(e) "Tourist camp" means a place where tents or tent houses, or camp cottages, or cabins or other structures are located and offered to the public or any segment of the public for human habitation.

44-18-8. Retail sale or sale at retail defined.-- (a) A "retail sale" or "sale at retail" means a any sale, including lease or rentals of tangible personal property, for any purpose other than resale, sublease or subrent in the regular course of business. and also means the rental of living quarters in any hotel, rooming house or tourist camp. The sale of tangible personal property to be used for purposes of rental in the regular course of business is considered to be a sale for resale. "Rental" means the agreeing by the owner to give exclusive use of property to another for a consideration and for any period of time under any one (1) agreement. In regards to telecommunications service as defined in §44-18-7(d)(9), retail sale does not include the purchase of telecommunications service by a telecommunications provider from another telecommunications provider for resale to the ultimate consumer, provided the purchaser submits to the seller a certificate attesting to the applicability of this exclusion, upon receipt of which the seller is relieved of any tax liability for the sale so long as the certificate is taken in good faith by the seller. A sale at retail includes sales defined in §44-18-7(13).

(b) The delivery in this state of tangible personal property by an owner or former owner or by a factor, if the delivery is to a consumer pursuant to a retail sale made by a retailer not engaged in business in this state, is a retail sale in this state by the person making the delivery and he or she shall include the retail selling price of the property in his or her gross receipts.

44-18-12. "Sale price" defined.-- (a) "Sale price" means the total amount for which tangible personal property is sold or leased or rented, and the total amount charged for the furnishing or distributing of electricity, natural gas, artificial gas, steam, refrigeration, water, telecommunications, telegraph, cable, and radio message service, community antenna television, subscription television and cable television service. “Sale price” means in regard to telecommunications service the total consideration received for such service as defined in §44-18-7(d)(9). In order to prevent multistate taxation of all telecommunications service, any taxpayer is allowed a credit or refund of sales tax upon presenting proof that a tax has been paid to another state to which the tax is properly due, for the identical service taxed under this chapter. “Sale price” means the total amount charged for the rental of living quarters in any hotel, rooming house or tourist camp, valued in money, whether paid in money or otherwise, including all of the following:

(I) Any services that are a part of the sale, valued in money, whether paid in money or otherwise.

(II) All receipts, cash, credits, and property of any kind.

(III) Any amount for which credit is given to the purchaser by the seller.

(b) "Sale price" does not include any of the following:

(I) Cash discounts allowed and taken on sales.

(II) The amount charged for property returned by customers upon rescission of the contract of sale when the entire amount exclusive of handling charges paid for property is refunded either in cash or credit, and where the property is returned within one hundred twenty (120) days from the date of delivery.

(III) The amount charged for labor or services rendered in installing or applying the property sold or for making alterations to wearing apparel in connection with the sale when the charge is separately stated by the retailer to the purchaser; provided, that in transactions subject to the provisions of this chapter the retailer separately states the charge when requested by the purchaser and any conduct that maybe restrained in the same manner prescribed in chapter 13.1 of title 6.

(IV) The amount of any tax, not including any manufacturers' or importers' excise tax, imposed by the United States upon or with respect to retail sales whether imposed upon the retailer or the consumer.

(V) Transportation charges separately stated, if the transportation occurs after the purchase of the property is made.

(a) “Sales price” applies to the measure subject to sales tax and means the total amount of consideration, including cash, credit, property, and services, for which personal property or services are sold, leased, or rented, valued in money, whether received in money or otherwise, without any deduction for the following:

(i) The seller’s cost of the property sold;

(ii) The cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, and any other expense of the seller;

(iii) Charges by the seller for any services necessary to complete the sale, other than delivery and installation charges;

(iv) Delivery charges, as defined in 44-18-7.1(i); or

(v) Credit for any trade-in, as determined by state law.

(b) “Sales price” shall not include:

(i) Discounts, including cash, term, or coupons that are not reimbursed by a third party that are allowed by a seller and taken by a purchaser on a sale;

(ii) The amount charged for labor or services rendered in installing or applying the property sold when the charge is separately stated by the retailer to the purchaser; provided that in transactions subject to the provisions of this chapter the retailer shall separately state such charge when requested by the purchaser and, further, the failure to separately state such charge when requested may be restrained in the same manner as other unlawful acts or practices prescribed in chapter 13.1 of title 6.

(iii) Interest, financing, and carrying charges from credit extended on the sale of personal property or services, if the amount is separately stated on the invoice, bill of sale or similar document given to the purchaser; and

(iv) Any taxes legally imposed directly on the consumer that are separately stated on the invoice, bill of sale or similar document given to the purchaser.

(v) Manufacturer rebates allowed on the sale of motor vehicles.

(c) “Sales price” shall include consideration received by the seller from third parties if:

(i) The seller actually receives consideration from a party other than the purchaser and the consideration is directly related to a price reduction or discount on the sale;

(ii) The seller has an obligation to pass the price reduction or discount through to the purchaser;

(iii) The amount of the consideration attributable to the sale is fixed and determinable by the seller at the time of the sale of the item to the purchaser; and

(iv) One of the following criteria is met:

(A) The purchaser presents a coupon, certificate or other documentation to the seller to claim a price reduction or discount where the coupon, certificate or documentation is authorized, distributed or granted by a third party with the understanding that the third party will reimburse any seller to whom the coupon, certificate or documentation is presented;

(B) The purchaser identifies himself or herself to the seller as a member of a group or organization entitled to a price reduction or discount (a “preferred customer” card that is available to any patron does not constitute membership in such a group), or

(C) The price reduction or discount is identified as a third party price reduction or discount on the invoice received by the purchaser or on a coupon, certificate or other documentation presented by the purchaser.

44-18-13. Gross receipts defined.--"Gross receipts" means the total amount of the sale price, as defined in §44‑18‑12 or the measure subject to tax as defined in §44-18-12.1, of the retail sales of retailers.

44-18-16. Tangible property defined.-- "Tangible personal property" means personal property which may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses. “Tangible personal property” includes electricity, water, gas, steam, and prewritten computer software.

44-18-17. In this “State” defined. -- "In this state" or "in the state" means within the exterior limits of the state of Rhode Island and includes all territory within these limits owned by or ceded to the United States of America.

44-18-18.1. Local meals and beverage tax.— (a) There is hereby levied and imposed, upon every purchaser of a meal and/or beverage, in addition to all other taxes and fees now imposed by law, a local sales or use meals and beverage tax upon each and every meal and/or beverage sold within the state of Rhode Island in or from an eating and/or drinking establishment, whether prepared in the eating and/or drinking establishment or not and whether consumed at the premises or not, at a rate of one percent (1%) of the gross receipts. The tax shall be paid to the tax administrator by the retailer at the time and in the manner provided.

(b) All sums received by the division of taxation under this section as taxes, penalties or forfeitures, interest, costs of suit and fines shall be distributed at least quarterly, credited and paid by the state treasurer to the city or town where the meals and beverages are delivered.

(c) When used in this section, the following words have the following meanings:

(1) “Beverage” means all nonalcoholic beverages, as well as alcoholic beverages, beer, lager beer, ale, porter, wine, similar fermented malt or vinous liquor.

(2) “Eating and/or drinking establishments” mean and include restaurants, bars, taverns, lounges, cafeterias, lunch counters, drive‑ins, roadside ice cream and refreshment stands, fish and chip places, fried chicken places, pizzerias, food and drink concessions, or similar facilities in amusement parks, bowling alleys, clubs, caterers, drive-in theatres, industrial plants, race tracks, shore resorts or other locations, lunch carts, mobile canteens and other similar vehicles, and other like places or business which furnish or provide facilities for immediate consumption of food at tables, chairs or counters or from trays, plates, cups or other tableware or in parking facilities provided primarily for the use of patrons in consuming products purchased at the location. Ordinarily, eating establishments do not mean and include food stores and supermarkets. Eating establishments do not mean “vending machines,” a self-contained automatic device that dispenses for sale foods, beverages, or confection products. Retailers selling prepared foods in bulk either in customer-furnished containers or in the seller’s containers, for example “Soup and Sauce” establishments, are deemed to be selling prepared foods ordinarily for immediate consumption and as such are considered eating establishments.

(3) “Meal” means any prepared food or beverage offered or held out for sale by an eating and/or drinking establishment for the purpose of being consumed by any person to satisfy the appetite and which is ready for immediate consumption. All such food and beverage, unless otherwise specifically exempted or excluded herein shall be included, whether intended to be consumed on the seller’s premises or elsewhere, whether designated as breakfast, lunch, snack, dinner, supper or by some other name, and without regard to the manner, time or place of service.

(d) This local sales or use meals and beverage tax shall be administered and collected by the division of taxation and unless provided to the contrary in this chapter, all of the administration, collection, and other provisions of chapters 18 and 19 of this article apply.

44-18-25. Presumption that sale is for storage, use, or consumption -- Resale certificate. -- It is presumed that all gross receipts are subject to the sales tax, and that the use of all tangible personal property is subject to the use tax, and that all tangible personal property sold or in processing or intended for delivery or delivered in this state is sold or delivered for storage, use, or other consumption in this state, until the contrary is established to the satisfaction of the tax administrator. The burden of proving the contrary is upon the person who makes the sale and the purchaser, unless the person who makes the sale takes from the purchaser a certificate to the effect that the purchase was for resale. The certificate relieves the person making the sale from the burden of proof only if taken in good faith from a person who is engaged in the business of making sales at retail and who holds a permit as provided in section § 44-19-2 or 44-19-3 and who, at the time of making the purchase, intends to sell what is so purchased in the regular course of business or is unable to ascertain at the time of purchase whether what is purchased will be sold or will be used for some other purpose. The certificate shall contain any information and be in the form that the tax administrator may require.

44-18-30. Gross receipts exempt from sales and use taxes. -- There are exempted from the taxes imposed by this chapter the following gross receipts:

(1) Sales and uses beyond constitutional power of state. From the sale and from the storage, use, or other consumption in this state of tangible personal property the gross receipts from the sale of which, or the storage, use, or other consumption of which, this state is prohibited from taxing under the Constitution of the United States or under the constitution of this state.

(2) Newspapers.

(i) From the sale and from the storage, use, or other consumption in this state of any newspaper.

(ii) "Newspaper" means an unbound publication printed on newsprint, which contains news, editorial comment, opinions, features, advertising matter, and other matters of public interest.

(iii) "Newspaper" does not include a magazine, handbill, circular, flyer, sales catalog, or similar item unless the item is printed for and distributed as a part of a newspaper.

(3) School meals. From the sale and from the storage, use, or other consumption in this state of meals served by public, private, or parochial schools, school districts, colleges, universities, student organizations, and parent teacher associations to the students or teachers of a school, college, or university whether the meals are served by the educational institutions or by a food service or management entity under contract to the educational institutions.

(4) Containers

(i) From the sale and from the storage, use, or other consumption in this state of:

(A) Non-returnable containers, including boxes, paper bags, and wrapping materials which are biodegradable and all bags and wrapping materials utilized in the medical and healing arts, when sold without the contents to persons who place the contents in the container and sell the contents with the container.

(B) Containers when sold with the contents if the sale price of the contents is not required to be included in the measure of the taxes imposed by this chapter.

(C) Returnable containers when sold with the contents in connection with a retail sale of the contents or when resold for refilling.

(ii) As used in this subdivision, the term "returnable containers" means containers of a kind customarily returned by the buyer of the contents for reuse. All other containers are "non-returnable containers."

(5) Charitable, educational, and religious organizations. (i) From the sale to as in defined in this section, and from the storage, use, and other consumption in this state or any other state of the United States of America of tangible personal property by hospitals not operated for a profit, "educational institutions" as defined in subdivision (18) not operated for a profit, churches, orphanages, and other institutions or organizations operated exclusively for religious or charitable purposes, interest free loan associations not operated for profit, nonprofit organized sporting leagues and associations and bands for boys and girls under the age of nineteen (19) years, the following vocational student organizations that are state chapters of national vocational students organizations: Distributive Education Clubs of America, (DECA); Future Business Leaders of America, phi beta lambda (FBLA/PBL); Future Farmers of America (FFA); Future Homemakers of America/Home Economics Related Occupations (FHA/HERD); and Vocational Industrial Clubs of America (VICA), organized nonprofit golden age and senior citizens clubs for men and women, and parent teacher associations.

(ii) In the case of contracts entered into with the federal government, its agencies or instrumentalities, this state or any other state of the United States of America, its agencies, any city, town, district, or other political subdivision of the states, hospitals not operated for profit, educational institutions not operated for profit, churches, orphanages, and other institutions or organizations operated exclusively for religious or charitable purposes, the contractor may purchase such materials and supplies (materials and/or supplies are defined as those which are essential to the project) that are to be utilized in the construction of the projects being performed under the contracts without payment of the tax.

(iii) The contractor shall not charge any sales or use tax to any exempt agency, institution, or organization but shall in that instance provide his or her suppliers with certificates in the form as determined by the division of taxation showing the reason for exemption; and the contractor's records must substantiate the claim for exemption by showing the disposition of all property so purchased. If any property is then used for a nonexempt purpose, the contractor must pay the tax on the property used.

(6) Gasoline. From the sale and from the storage, use, or other consumption in this state of: (i) gasoline and other products taxed under chapter 36 of title 31, and (ii) fuels used for the propulsion of airplanes.

(7) Purchase for manufacturing purposes.

(i) From the sale and from the storage, use, or other consumption in this state of computer software, tangible personal property, electricity, natural gas, artificial gas, steam, refrigeration, and water, when the property or service is purchased for the purpose of being manufactured into a finished product for resale, and becomes an ingredient, component, or integral part of the manufactured, compounded, processed, assembled, or prepared product, or if the property or service is consumed in the process of manufacturing for resale computer software, tangible personal property, electricity, natural gas, artificial gas, steam, refrigeration, or water.

(ii) "Consumed" means destroyed, used up, or worn out to the degree or extent that the property cannot be repaired, reconditioned, or rendered fit for further manufacturing use.

(iii) "Consumed" includes mere obsolescence.

(iv) "Manufacturing" means and includes manufacturing, compounding, processing, assembling, preparing, or producing.

(v) "Process of manufacturing" means and includes all production operations performed in the producing or processing room, shop, or plant, insofar as the operations are a part of and connected with the manufacturing for resale of tangible personal property, electricity, natural gas, artificial gas, steam, refrigeration, or water and all production operations performed insofar as the operations are a part of and connected with the manufacturing for resale of computer software.

(vi) "Process of manufacturing" does not mean or include administration operations such as general office operations, accounting, collection, sales promotion, nor does it mean or include distribution operations which occur subsequent to production operations, such as handling, storing, selling, and transporting the manufactured products, even though the administration and distribution operations are performed by or in connection with a manufacturing business.

(8) State and political subdivisions. From the sale to, and from the storage, use, or other consumption by, this state, any city, town, district, or other political subdivision of this state. Every redevelopment agency created pursuant to chapter 31 of title 45 is deemed to be a subdivision of the municipality where it is located.

(9) Food products.

(i) From the sale and the storage, use, or other consumption in this state, subsequent to March 31, 1948, of food products for human consumption.

(ii) "Food products" includes except as otherwise provided in this subdivision, cereals and cereal products; milk and milk products, other than candy and confectionary, but including ice cream; oleomargarine; meat and meat products; fish and fish products; eggs and egg products; vegetables and vegetable products; fruit and fruit products, including pure fruit juices; spices, condiments, and salt; sugar and sugar products other than candy and confectionery; coffee and coffee substitutes; tea, cocoa and cocoa products, other than candy and confectionery; non-carbonated and non-effervescent bottled waters sold for human consumption.

(iii) "Food products" shall not include spirituous, malt, or vinous liquors; soft drinks, sodas, or beverages that are ordinarily dispensed at bars or soda fountains or in connection therewith; medicines, tonics, vitamins and preparations in liquid, powdered, granular, tablet, capsule, lozenge, or pill form, sold as dietary supplements or adjuncts, except when sold on the prescription of a physician; or mineral and carbonated bottled waters and ice.

(iv) "Food products" also does not include meals served on or off the premises of the retailer; or drinks or food furnished, prepared, or served for consumption at tables, chairs, or counters, or from trays, glasses, dishes, or other tableware provided by the retailer.

(v) "The sale of meals and other food products ordinarily sold for immediate consumption on or off the premises of the retailer is a taxable sale even though such products are sold on a "take out" or "to go" order, and are actually packaged or wrapped and taken from the premises.

(9) Food and food ingredients.—From the sale and storage, use, or other consumption in this state of food and food ingredients as defined in section 44-18-7.1(l).

For the purposes of this exemption “food and food ingredients” shall not include candy, soft drinks, dietary supplements, alcoholic beverages, tobacco, food sold through vending machines or prepared food (as those terms are defined in § 44-18-7.1, unless the prepared food is:

(i) Sold by a seller whose primary NAICS classification is manufacturing in sector 311, except sub-sector 3118 (bakeries);

(ii) Sold in an unheated state by weight or volume as a single item;

(iii) Bakery items, including bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, tortillas; and

is not sold with utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins, or straws.

(10) Medicines, and drugs and durable medical equipment. From the sale and from the storage, use, or other consumption in this state, subsequent to March 31, 1948, of;

(i) “medicines” and “drugs” as defined in § 5-19-1 [repealed] 44-18-7.1(h)(i), sold on prescriptions, and proprietary medicines, popularly called patent medicines, including, but not limited to, disposable or reusable devices such as syringe infusers, ambulatory drug delivery pumps and supplies used with these items which are sold on prescription to individuals to be used by them to dispense or administer prescription drugs, and related ancillary dressings and supplies used to dispense or administer prescription drugs blood, medical oxygen, and insulin whether or not sold on prescription, and over-the-counter drugs as defined in section 44-18-7.1(h)(ii). For purposes of this exemption over‑the‑counter drugs shall not include grooming and hygiene products as defined in section 44-18-7.1(h)(iii).

(ii) Durable medical equipment as defined in section 44‑18‑7.1(k) for home use only, including, but not limited to, syringe infusers, ambulatory drug delivery pumps, hospital beds, convalescent chairs, and chair lifts. Supplies used in connection with syringe infusers and ambulatory drug delivery pumps which are sold on prescription to individuals to be used by them to dispense or administer prescription drugs, and related ancillary dressings and supplies used to dispense or administer prescription drugs shall also be exempt from tax.

(11) Prosthetic and orthopedic appliances devices and mobility enhancing equipment. From the sale and from the storage, use, or other consumption in this state, subsequent to March 31, 1948, of prosthetic devices as defined in section 44‑18-7.1(t), sold on prescription, including but not limited to, crutches, artificial limbs, dentures, spectacles and eyeglasses, and artificial eyes; artificial hearing devices and other prostheses or orthopedic appliances designed and purchased to be worn on the person of the owner or user and hearing aids, whether or not sold on prescription and mobility enhancing equipment as defined in 44-18-7.1(p) including wheelchairs, crutches and canes.

(12) Coffins, caskets, and burial garments. From the sale and from the storage, use, or other consumption in this state of coffins or caskets, and shrouds or other burial garments which are ordinarily sold by a funeral director as part of the business of funeral directing.

(13) Motor vehicles sold to nonresidents.

(i) From the sale, subsequent to June 30, 1958, of a motor vehicle to a bona fide nonresident of this state who does not register the motor vehicle in this state, whether the sale or delivery of the motor vehicle is made in this state or at the place of residence of the nonresident. A motor vehicle sold to a bona fide nonresident whose state of residence does not allow a like exemption to its nonresidents is not exempt from the tax imposed under § 44-18-20. In that event the bona fide nonresident pays a tax to Rhode Island on the sale at a rate equal to the rate that would be imposed in his or her state of residence not to exceed the rate that would have been imposed under § 44-18-20. Notwithstanding any other provisions of law, a licensed motor vehicle dealer shall add and collect the tax required under this subdivision and remit the tax to the tax administrator under the provisions of chapters 18 and 19 of this title. When a Rhode Island licensed motor vehicle dealer is required to add and collect the sales and use tax on the sale of a motor vehicle to a bona fide nonresident as provided in this section, the dealer in computing the tax takes into consideration the law of the state of the nonresident as it relates to the trade-in of motor vehicles.

(ii) The tax administrator, in addition to the provisions of §§ 44-19-27 and 44-19-28, may require any licensed motor vehicle dealer to keep records of sales to bona fide nonresidents as the tax administrator deems reasonably necessary to substantiate the exemption provided in this subdivision, including the affidavit of a licensed motor vehicle dealer that the purchaser of the motor vehicle was the holder of, and had in his or her possession a valid out of state motor vehicle registration or a valid out of state driver's license.

(iii) Any nonresident who registers a motor vehicle in this state within ninety (90) days of the date of its sale to him or her is deemed to have purchased the motor vehicle for use, storage, or other consumption in this state, and is subject to, and liable for the use tax imposed under the provisions of § 44-18-20.

(14) Sales in public buildings by blind people. From the sale and from the storage, use, or other consumption in all public buildings in this state of all products or wares by any person licensed under § 40-9-11.1.

(15) Air and water pollution control facilities. From the sale, storage, use, or other consumption in this state of tangible personal property or supplies acquired for incorporation into or used and consumed in the operation of a facility, the primary purpose of which is to aid in the control of the pollution or contamination of the waters or air of the state, as defined in chapter 12 of title 46 and chapter 25 of title 23, respectively, and which has been certified as approved for that purpose by the director of environmental management. The director of environmental management may certify to a portion of the tangible personal property or supplies acquired for incorporation into those facilities or used and consumed in the operation of those facilities to the extent that that portion has as its primary purpose the control of the pollution or contamination of the waters or air of this state. As used in this subdivision, "facility" means any land, facility, device, building, machinery, or equipment.

(16) Camps. From the rental charged for living quarters, or sleeping or housekeeping accommodations at camps or retreat houses operated by religious, charitable, educational, or other organizations and associations mentioned in subdivision (5), or by privately owned and operated summer camps for children.

(17) Certain institutions. From the rental charged for living or sleeping quarters in an institution licensed by the state for the hospitalization, custodial, or nursing care of human beings.

(18) Educational institutions. From the rental charged by any educational institution for living quarters, or sleeping or housekeeping accommodations or other rooms or accommodations to any student or teacher necessitated by attendance at an educational institution. "Educational institution" as used in this section means an institution of learning not operated for profit which is empowered to confer diplomas, educational, literary, or academic degrees, which has a regular faculty, curriculum, and organized body of pupils or students in attendance throughout the usual school year, which keeps and furnishes to students and others records required and accepted for entrance to schools of secondary, collegiate, or graduate rank, no part of the net earnings of which inures to the benefit of any individual.

(19) Motor vehicle and adaptive equipment for persons with disabilities.

(i) From the sale of: (A) special adaptations, (B) the component parts of the special adaptations, or (C) a specially adapted motor vehicle; provided, that the owner furnishes to the tax administrator an affidavit of a licensed physician to the effect that the specially adapted motor vehicle is necessary to transport a family member with a disability or where the vehicle has been specially adapted to meet the specific needs of the person with a disability. This exemption applies to not more than one motor vehicle owned and registered for personal, noncommercial use.

(ii) For the purpose of this subsection the term "special adaptations" includes, but is not limited to: wheelchair lifts; wheelchair carriers; wheelchair ramps; wheelchair securements; hand controls; steering devices; extensions, relocations, and crossovers of operator controls; power-assisted controls; raised tops or dropped floors; raised entry doors; or alternative signaling devices to auditory signals.

(iii) For the purpose of this subdivision the exemption for a "specially adapted motor vehicle" means a use tax credit not to exceed the amount of use tax that would otherwise be due on the motor vehicle, exclusive of any adaptations. The use tax credit is equal to the cost of the special adaptations, including installation.

(20) Heating fuels. From the sale and from the storage, use, or other consumption in this state of every type of fuel used in the heating of homes and residential premises.

(21) Electricity and gas. From the sale and from the storage, use, or other consumption in this state of electricity and gas furnished for domestic use by occupants of residential premises.

(22) Manufacturing machinery and equipment.

(i) From the sale and from the storage, use, or other consumption in this state of tools, dies, and molds, and machinery and equipment (including replacement parts), and related items to the extent used in an industrial plant in connection with the actual manufacture, conversion, or processing of tangible personal property, or to the extent used in connection with the actual manufacture, conversion or processing of computer software as that term is utilized in industry numbers 7371, 7372, and 7373 in the standard industrial classification manual prepared by the technical committee on industrial classification, office of statistical standards, executive office of the president, United States bureau of the budget, as revised from time to time, to be sold, or that machinery and equipment used in the furnishing of power to an industrial manufacturing plant. For the purposes of this subdivision, "industrial plant" means a factory at a fixed location primarily engaged in the manufacture, conversion, or processing of tangible personal property to be sold in the regular course of business;

(ii) Machinery and equipment and related items are not deemed to be used in connection with the actual manufacture, conversion, or processing of tangible personal property, or in connection with the actual manufacture, conversion or processing of computer software as that term is utilized in industry numbers 7371, 7372, and 7373 in the standard industrial classification manual prepared by the technical committee on industrial classification, office of statistical standards, executive office of the president, United States bureau of the budget, as revised from time to time, to be sold to the extent the property is used in administration or distribution operations;

(iii) Machinery and equipment and related items used in connection with the actual manufacture, conversion, or processing of any computer software or any tangible personal property which is not to be sold and which would be exempt under subdivision (7) or this subdivision if purchased from a vendor or machinery and equipment and related items used during any manufacturing, converting or processing function is exempt under this subdivision even if that operation, function, or purpose is not an integral or essential part of a continuous production flow or manufacturing process;

(iv) Where a portion of a group of portable or mobile machinery is used in connection with the actual manufacture, conversion, or processing of computer software or tangible personal property to be sold, as previously defined, that portion, if otherwise qualifying, is exempt under this subdivision even though the machinery in that group is used interchangeably and not otherwise identifiable as to use.

(23) Trade-in value of motor vehicles. From the sale and from the storage, use, or other consumption in this state of so much of the purchase price paid for a new or used automobile as is allocated for a trade-in allowance on the automobile of the buyer given in trade to the seller or of the proceeds applicable only to the motor vehicle as are received from an insurance claim as a result of a stolen or damaged motor vehicle, or of the proceeds applicable only to the automobile as are received from the manufacturer of automobiles for the repurchase of the automobile whether the repurchase was voluntary or not towards the purchase of a new or used automobile by the buyer; provided, that the proceeds from an insurance claim or repurchase is in lieu of the benefit prescribed in § 44-18-21 for the total loss or destruction of the automobile; and provided, further, that the tax has not been reimbursed as part of the insurance claim or repurchase. For the purpose of this subdivision, the word "automobile" means a private passenger automobile not used for hire and does not refer to any other type of motor vehicle.

(24) Precious metal bullion.

(i) From the sale and from the storage, use, or other consumption in this state of precious metal bullion, substantially equivalent to a transaction in securities or commodities.

(ii) For purposes of this subdivision, "precious metal bullion" means any elementary precious metal which has been put through a process of smelting or refining, including, but not limited to, gold, silver, platinum, rhodium, and chromium, and which is in a state or condition that its value depends upon its content and not upon its form.

(iii) The term does not include fabricated precious metal which has been processed or manufactured for some one or more specific and customary industrial, professional, or artistic uses.

(25) Commercial vessels. From sales made to a commercial ship, barge, or other vessel of fifty (50) tons burden or over, primarily engaged in interstate or foreign commerce, and from the repair, alteration, or conversion of the vessels, and from the sale of property purchased for the use of the vessels including provisions, supplies, and material for the maintenance and/or repair of the vessels.

(26) Commercial fishing vessels. From the sale and from the storage, use, or other consumption in this state of vessels and other water craft which are in excess of five (5) net tons and which are used exclusively for "commercial fishing", as defined in this subdivision, and from the repair, alteration, or conversion of those vessels and other watercraft, and from the sale of property purchased for the use of those vessels and other watercraft including provisions, supplies, and material for the maintenance and/or repair of the vessels and other watercraft and the boats nets, cables, tackle, and other fishing equipment appurtenant to or used in connection with the commercial fishing of the vessels and other watercraft. "Commercial fishing" means the taking or the attempting to take any fish, shellfish, crustacea, or bait species with the intent of disposing of them for profit or by sale, barter, trade, or in commercial channels. The term does not include subsistence fishing, i.e., the taking for personal use and not for sale or barter; or sport fishing; but shall include vessels and other watercraft with a Rhode Island party and charter boat license issued by the department of environmental management pursuant to § 20-2-27.1 which meet the following criteria: (i) the operator must have a current U.S.C.G. license to carry passengers for hire; (ii) U.S.C.G. vessel documentation in the coast wide fishery trade; (iii) U.S.C.G. vessel documentation as to proof of Rhode Island home port status or a Rhode Island boat registration to prove Rhode Island home port status; (iv) the vessel must be used as a commercial passenger carrying fishing vessel to carry passengers for fishing. The vessel must be able to demonstrate that at least fifty percent (50%) of its annual gross income derives from charters or provides documentation of a minimum of one hundred (100) charter trips annually; (v) the vessel must have a valid Rhode Island party and charter boat license. The tax administrator shall implement the provisions of this subdivision by promulgating rules and regulations relating thereto.

(27) Clothing and footwear. From the sales of articles of clothing, including footwear, intended to be worn or carried on or about the human body. For the purposes of this section “clothing or footwear” does not include clothing accessories or equipment or special clothing or footwear primarily designed for athletic activity or protective use as these terms are defined in section 44-18-7.1(f) and which is not normally worn except when so used; and sales of wearing materials or any cloth made of natural or synthetic fibers and used for clothing purposes.

(28) Water for residential use. From the sale and from the storage, use, or other consumption in this state of water furnished for domestic use by occupants of residential premises.

(29) Bibles. [Unconstitutional; see Ahlburn v. Clark, 728 A.2d 449 (R.I. 1999); see Notes to Decisions.] From the sale and from the storage, use, or other consumption in the state of any canonized scriptures of any tax-exempt nonprofit religious organization including, but not limited to, the Old Testament and the New Testament versions.

(30) Boats.

(i) From the sale of a boat or vessel to a bona fide nonresident of this state who does not register the boat or vessel in this state, or document the boat or vessel with the United States government at a home port within the state, whether the sale or delivery of the boat or vessel is made in this state or elsewhere; provided, that the nonresident transports the boat within thirty (30) days after delivery by the seller outside the state for use thereafter solely outside the state.

(ii) The tax administrator, in addition to the provisions of §§ 44-19-17 and 44-19-28, may require the seller of the boat or vessel to keep records of the sales to bona fide nonresidents as the tax administrator deems reasonably necessary to substantiate the exemption provided in this subdivision, including the affidavit of the seller that the buyer represented himself or herself to be a bona fide nonresident of this state and of the buyer that he or she is a nonresident of this state.

(31) Youth activities equipment. From the sale, storage, use, or other consumption in this state of items for not more than twenty dollars ($20.00) each by nonprofit Rhode Island eleemosynary organizations, for the purposes of youth activities which the organization is formed to sponsor and support; and by accredited elementary and secondary schools for the purposes of the schools or of organized activities of the enrolled students.

(32) Farm equipment. From the sale and from the storage or use of machinery and equipment used directly for commercial farming and agricultural production; including, but not limited to, tractors, ploughs, harrows, spreaders, seeders, milking machines, silage conveyors, balers, bulk milk storage tanks, trucks with farm plates, mowers, combines, irrigation equipment, greenhouses and greenhouse coverings, graders and packaging machines, tools and supplies and other farming equipment, including replacement parts, appurtenant to or used in connection with commercial farming and tools and supplies used in the repair and maintenance of farming equipment. "Commercial farming" means the keeping or boarding of five (5) or more horses or the production within this state of agricultural products, including, but not limited to, field or orchard crops, livestock, dairy, and poultry, or their products, where the keeping, boarding, or production provides at least two thousand five hundred dollars ($2,500) in annual gross sales to the operator, whether an individual, a group, a partnership, or a corporation for exemptions issued prior to July 1, 2002; for exemptions issued or renewed after July 1, 2002, there shall be two (2) levels. Level I shall be based on proof of annual gross sales from commercial farming of at least twenty-five hundred dollars ($2,500) and shall be valid for purchases subject to the exemption provided in this subdivision except for motor vehicles with an excise tax value of five thousand dollars ($5,000) or greater; Level II shall be based on proof of annual gross sales from commercial farming of at least ten thousand dollars ($10,000) or greater and shall be valid for purchases subject to the exemption provided in this subdivision including motor vehicles with an excise tax value of five thousand dollars ($5,000) or greater. For the initial issuance of the exemptions, proof of the requisite amount of annual gross sales from commercial farming shall be required for the prior year; for any renewal of an exemption granted in accordance with this subdivision at either Level I or Level II, proof of gross annual sales from commercial farming at the requisite amount shall be required for each of the prior two (2) years. Certificates of exemption issued or renewed after July 1, 2002, shall clearly indicate the level of the exemption and be valid for four (4) years after the date of issue. This exemption applies even if the same equipment is used for ancillary uses, or is temporarily used for a non-farming or a non-agricultural purpose, but shall not apply to motor vehicles acquired after July 1, 2002, unless the vehicle is a farm vehicle as defined pursuant to § 31-1-8 and is eligible for registration displaying farm plates as provided for in § 31-3-31.

(33) Compressed air. From the sale and from the storage, use, or other consumption in the state of compressed air.

(34) Flags. From the sale and from the storage, consumption, or other use in this state of United States, Rhode Island or POW-MIA flags.

(35) Motor vehicle and adaptive equipment to certain veterans. From the sale of a motor vehicle and adaptive equipment to and for the use of a veteran with a service-connected loss of or the loss of use of a leg, foot, hand, or arm, or any veteran who is a double amputee, whether service connected or not. The motor vehicle must be purchased by and especially equipped for use by the qualifying veteran. Certificate of exemption or refunds of taxes paid is granted under rules or regulations that the tax administrator may prescribe.

(36) Textbooks. From the sale and from the storage, use, or other consumption in this state of textbooks by an "educational institution" as defined in subdivision (18) of this section and as well as any educational institution within the purview of § 16-63-9(4) and used textbooks by any purveyor.

(37) Tangible personal property and supplies used in on-site hazardous waste recycling, reuse, or treatment. From the sale, storage, use, or other consumption in this state of tangible personal property or supplies used or consumed in the operation of equipment, the exclusive function of which is the recycling, reuse, or recovery of materials (other than precious metals, as defined in subdivision (24)(ii) of this section) from the treatment of "hazardous wastes", as defined in § 23-19.1-4, where the "hazardous wastes" are generated in Rhode Island solely by the same taxpayer and where the personal property is located at, in, or adjacent to a generating facility of the taxpayer in Rhode Island. The taxpayer shall procure an order from the director of the department of environmental management certifying that the equipment and/or supplies as used, or consumed, qualify for the exemption under this subdivision. If any information relating to secret processes or methods of manufacture, production, or treatment is disclosed to the department of environmental management only to procure an order, and is a "trade secret" as defined in § 28-21-10(b), it is not open to public inspection or publicly disclosed unless disclosure is required under chapter 21 of title 28 or chapter 24.4 of title 23.

(38) Promotional and product literature of boat manufacturers. From the sale and from the storage, use, or other consumption of promotional and product literature of boat manufacturers shipped to points outside of Rhode Island which either: (i) accompany the product which is sold, (ii) are shipped in bulk to out of state dealers for use in the sale of the product, or (iii) are mailed to customers at no charge.

(39) Food items paid for by food stamps. From the sale and from the storage, use, or other consumption in this state of eligible food items payment for which is properly made to the retailer in the form of U.S. government food stamps issued in accordance with the Food Stamp Act of 1977, 7 U.S.C. § 2011 et seq.

(40) Transportation charges. From the sale or hiring of motor carriers as defined in § 39-12-2(l) to haul goods, when the contract or hiring cost is charged by a motor freight tariff filed with the Rhode Island public utilities commission on the number of miles driven or by the number of hours spent on the job.

(41) Trade-in value of boats. From the sale and from the storage, use, or other consumption in this state of so much of the purchase price paid for a new or used boat as is allocated for a trade-in allowance on the boat of the buyer given in trade to the seller or of the proceeds applicable only to the boat as are received from an insurance claim as a result of a stolen or damaged boat, towards the purchase of a new or used boat by the buyer.

(42) Equipment used for research and development. From the sale and from the storage, use, or other consumption of equipment to the extent used for research and development purposes by a qualifying firm. For the purposes of this subdivision, "qualifying firm" means a business for which the use of research and development equipment is an integral part of its operation, and "equipment" means scientific equipment, computers, software, and related items.

(43) Coins. From the sale and from the other consumption in this state of coins having numismatic or investment value.

(44) Farm structure construction materials. Lumber, hardware and other materials used in the new construction of farm structures, including production facilities such as, but not limited to, farrowing sheds, free stall and stanchion barns, milking parlors, silos, poultry barns, laying houses, fruit and vegetable storages, rooting cellars, propagation rooms, greenhouses, packing rooms, machinery storage, seasonal farm worker housing, certified farm markets, bunker and trench silos, feed storage sheds, and any other structures used in connection with commercial farming.

(45) Telecommunications carrier access service. Carrier access service or telecommunications service when purchased by a telecommunications company from another telecommunications company to facilitate the provision of telecommunications service.

(46) Boats or vessels brought into the state exclusively for winter storage, maintenance, repair or sale. Notwithstanding the provisions of §§ 44-18-10, 44-18-11, 44-18-20, the tax imposed by § 44-18-20 is not applicable for the period commencing on the first day of October in any year to and including the 30th day of April next succeeding with respect to the use of any boat or vessel within this state exclusively for purposes of: (i) delivery of the vessel to a facility in this state for storage, including dry storage and storage in water by means of apparatus preventing ice damage to the hull, maintenance, or repair; (ii) the actual process of storage, maintenance, or repair of the boat or vessel; or (iii) storage for the purpose of selling the boat or vessel.

(47) Jewelry display product. From the sale and from the storage, use, or other consumption in this state of tangible personal property used to display any jewelry product; provided, that title to the jewelry display product is transferred by the jewelry manufacturer or seller and that the jewelry display product is shipped out of state for use solely outside the state and is not returned to the jewelry manufacturer or seller.

(48) Boats or vessels generally. Notwithstanding the provisions of this chapter, the tax imposed by §§ 44-18-20 and 44-18-18 shall not apply with respect to the sale and to the storage, use, or other consumption in this state of any new or used boat. The exemption provided for in this subdivision does not apply after October 1, 1993, unless prior to October 1, 1993, the federal ten percent (10%) surcharge on luxury boats is repealed.

(49) Banks and Regulated investment companies interstate toll-free calls. Notwithstanding the provisions of this chapter, the tax imposed by this chapter does not apply to the furnishing of interstate and international, toll-free terminating telecommunication service that is used directly and exclusively by or for the benefit of an eligible company as defined in this subdivision; provided, that an eligible company employs on average during the calendar year no less than five hundred (500) "full-time equivalent employees", as that term is defined in § 42-64.5-2. For purposes of this section, an "eligible company" means a "regulated investment company" as that term is defined in the Internal Revenue Code of 1986, 26 U.S.C. § 1 et seq., or a corporation to the extent the service is provided, directly or indirectly, to or on behalf of a regulated investment company, an employee benefit plan, a retirement plan or a pension plan or a state chartered bank.

(50) Mobile and manufactured homes generally. From the sale and from the storage, use, or other consumption in this state of mobile and/or manufactured homes as defined and subject to taxation pursuant to the provisions of chapter 44 of title 31.

(51) Manufacturing business reconstruction materials.

(i) From the sale and from the storage, use or other consumption in this state of lumber, hardware, and other building materials used in the reconstruction of a manufacturing business facility which suffers a disaster, as defined in this subdivision, in this state. "Disaster" means any occurrence, natural or otherwise, which results in the destruction of sixty percent (60%) or more of an operating manufacturing business facility within this state. "Disaster" does not include any damage resulting from the willful act of the owner of the manufacturing business facility.

(ii) Manufacturing business facility includes, but is not limited to, the structures housing the production and administrative facilities.

(iii) In the event a manufacturer has more than one manufacturing site in this state, the sixty percent (60%) provision applies to the damages suffered at that one site.

(iv) To the extent that the costs of the reconstruction materials are reimbursed by insurance, this exemption does not apply.

(52) Tangible personal property and supplies used in the processing or preparation of floral products and floral arrangements. From the sale, storage, use, or other consumption in this state of tangible personal property or supplies purchased by florists, garden centers, or other like producers or vendors of flowers, plants, floral products, and natural and artificial floral arrangements which are ultimately sold with flowers, plants, floral products, and natural and artificial floral arrangements or are otherwise used in the decoration, fabrication, creation, processing, or preparation of flowers, plants, floral products, or natural and artificial floral arrangements, including descriptive labels, stickers, and cards affixed to the flower, plant, floral product or arrangement, artificial flowers, spray materials, floral paint and tint, plant shine, flower food, insecticide and fertilizers.

(53) Horse food products. From the sale and from the storage, use, or other consumption in this state of horse food products purchased by a person engaged in the business of the boarding of horses.

(54) Non-motorized recreational vehicles sold to nonresidents.

(i) From the sale, subsequent to June 30, 2003, of a non-motorized recreational vehicle to a bona fide nonresident of this state who does not register the non-motorized recreational vehicle in this state, whether the sale or delivery of the non-motorized recreational vehicle is made in this state or at the place of residence of the nonresident; provided, that a non-motorized recreational vehicle sold to a bona fide nonresident whose state of residence does not allow a like exemption to its nonresidents is not exempt from the tax imposed under § 44-18-20; provided, further, that in that event the bona fide nonresident pays a tax to Rhode Island on the sale at a rate equal to the rate that would be imposed in his or her state of residence not to exceed the rate that would have been imposed under § 44-18-20. Notwithstanding any other provisions of law, a licensed non-motorized recreational vehicle dealer shall add and collect the tax required under this subdivision and remit the tax to the tax administrator under the provisions of chapters 18 and 19 of this title. Provided, that when a Rhode Island licensed non-motorized recreational vehicle dealer is required to add and collect the sales and use tax on the sale of a non-motorized recreational vehicle to a bona fide nonresident as provided in this section, the dealer in computing the tax takes into consideration the law of the state of the nonresident as it relates to the trade-in of motor vehicles.

(ii) The tax administrator, in addition to the provisions of §§ 44-19-27 and 44-19-28, may require any licensed non-motorized recreational vehicle dealer to keep records of sales to bona fide nonresidents as the tax administrator deems reasonably necessary to substantiate the exemption provided in this subdivision, including the affidavit of a licensed non-motorized recreational vehicle dealer that the purchaser of the non-motorized recreational vehicle was the holder of, and had in his or her possession a valid out-of-state non-motorized recreational vehicle registration or a valid out-of-state driver's license.

(iii) Any nonresident who registers a non-motorized recreational vehicle in this state within ninety (90) days of the date of its sale to him or her is deemed to have purchased the non-motorized recreational vehicle for use, storage, or other consumption in this state, and is subject to, and liable for the use tax imposed under the provisions of § 44-18-20.

(iv) "Non-motorized recreational vehicle" means any portable dwelling designed and constructed to be used as a temporary dwelling for travel, camping, recreational, and vacation use which is eligible to be registered for highway use, including, but not limited to, "pick-up coaches" or "pick-up campers," "travel trailers," and "tent trailers" as those terms are defined in chapter 1 of title 31.

(55) Sprinkler and fire alarm systems in existing buildings. From the sale in this state of sprinkler and fire alarm systems, emergency lighting and alarm systems, and from the sale of the materials necessary and attendant to the installation of those systems, that are required in buildings and occupancies existing therein in July 2003, in order to comply with any additional requirements for such buildings arising directly from the enactment of the Comprehensive Fire Safety Act of 2003, and that are not required by any other provision of law or ordinance or regulation adopted pursuant to that Act. The exemption provided in this subdivision shall expire on December 31, 2008.

(56) Aircraft. Notwithstanding the provisions of this chapter, the tax imposed by §§ 44-18-18 and 44-18-20 shall not apply with respect to the sale and to the storage, use, or other consumption in this state of any new or used aircraft or aircraft parts.

(57) Renewable energy products. Notwithstanding any other provisions of Rhode Island general laws the following products shall also be exempt from sales tax: solar photovoltaic modules or panels, or any module or panel that generates electricity from light; solar thermal collectors, including, but not limited to, those manufactured with flat glass plates, extruded plastic, sheet metal, and/or evacuated tubes; geothermal heat pumps, including both water-to-water and water-to-air type pumps; wind turbines; towers used to mount wind turbines if specified by or sold by a wind turbine manufacturer; DC to AC inverters that interconnect with utility power lines; manufactured mounting racks and ballast pans for solar collector, module or panel installation. Not to include materials that could be fabricated into such racks; monitoring and control equipment, if specified or supplied by a manufacturer of solar thermal, solar photovoltaic, geothermal, or wind energy systems or if required by law or regulation for such systems but not to include pumps, fans or plumbing or electrical fixtures unless shipped from the manufacturer affixed to, or an integral part of, another item specified on this list; and solar storage tanks that are part of a solar domestic hot water system or a solar space heating system. If the tank comes with an external heat exchanger it shall also be tax exempt, but a standard hot water tank is not exempt from state sales tax.

(58) Returned property. The amount charged for property returned by customers upon rescission of the contract of sale when the entire amount exclusive of handling charges paid for the property is refunded in either cash or credit, and where the property is returned within one hundred twenty (120) days from the date of delivery.

(59) Dietary Supplements. From the sale and from the storage, use or other consumption of dietary supplements as defined in 44-18-7.1(l)(v), sold on prescriptions.

SECTION 10. Chapter 44-18 of the General Laws entitled “Sales and Use Taxes – Liability and Computation” is thereby amended by adding thereto the following sections:

44-18-7.1. Additional Definitions. -- (a) “Agreement” means the Streamlined Sales and Use Tax Agreement.

(b) “Alcoholic Beverages” means beverages that are suitable for human consumption and contain one-half of one percent (.5%) or more of alcohol by volume.

(c) “Bundled Transaction” is the retail sale of two or more products, except real property and services to real property, where (1) the products are otherwise distinct and identifiable, and (2) the products are sold for one non-itemized price. A “bundled transaction” does not include the sale of any products in which the “sales price” varies, or is negotiable, based on the selection by the purchaser of the products included in the transaction.

(i) “Distinct and identifiable products” does not include:

(A) Packaging – such as containers, boxes, sacks, bags, and bottles – or other materials – such as wrapping, labels, tags, and instruction guides – that accompany the “retail sale” of the products and are incidental or immaterial to the “retail sale” thereof. Examples of packaging that are incidental or immaterial include grocery sacks, shoeboxes, dry cleaning garment bags and express delivery envelopes and boxes.

(B) A product provided free of charge with the required purchase of another product. A product is “provided free of charge” if the “sales price” of the product purchased does not vary depending on the inclusion of the products “provided free of charge.”

(C) Items included in the member state’s definition of “sales price,” pursuant to Appendix C of the Agreement.

(ii) The term “one non-itemized price” does not include a price that is separately identified by product on binding sales or other supporting sales-related documentation made available to the customer in paper or electronic form including, but not limited to, an invoice, bill of sale, receipt, contract, service agreement, lease agreement, periodic notice of rates and services, rate card, or price list.

(iii) A transaction that otherwise meets the definition of a “bundled transaction” as defined above, is not a “bundled transaction” if it is:

(A) The “retail sale” of tangible personal property and a service where the tangible personal property is essential to the use of the service, and is provided exclusively in connection with the service, and the true object of the transaction is the service; or

(B) The “retail sale” of services where one service is provided that is essential to the use or receipt of a second service and the first service is provided exclusively in connection with the second service and the true object of the transaction is the second service; or

(C) A transaction that includes taxable products and nontaxable products and the “purchase price” or “sales price” of the taxable products is de minimis.

1. De minimis means the seller’s “purchase price” or “sales price” of the taxable products is ten percent (10%) or less of the total “purchase price” or “sales price” of the bundled products.

2. Sellers shall use either the “purchase price” or the “sales price” of the products to determine if the taxable products are de minimis. Sellers may not use a combination of the “purchase price” and “sales price” of the products to determine if the taxable products are de minimis.

3. Sellers shall use the full term of a service contract to determine if the taxable products are de minimis; or

(D) The “retail sale” of exempt tangible personal property and taxable tangible personal property where:

1. the transaction includes “food and food ingredients”, “drugs”, “durable medical equipment”, “mobility enhancing equipment”, “over-the-counter drugs”, “prosthetic devices” (all as defined in Section 44-18-7.1) or medical supplies; and

2. where the seller’s “purchase price” or “sales price” of the taxable tangible personal property is fifty percent (50%) or less of the total “purchase price” or “sales price” of the bundled tangible personal property. Sellers may not use a combination of the “purchase price” and “sales price” of the tangible personal property when making the fifty percent (50%) determination for a transaction.

(d)“Certified Automated System (CAS)” means software certified under the Agreement to calculate the tax imposed by each jurisdiction on a transaction, determine the amount of tax to remit to the appropriate state, and maintain a record of the transaction.

(e) “Certified Service Provider (CSP)” means an agent certified under the Agreement to perform all the seller’s sales and use tax functions, other than the seller’s obligation to remit tax on its own purchases.

(f) Clothing and Related Items

(i) “Clothing” means all human wearing apparel suitable for general use.

(ii) “Clothing accessories or equipment” means incidental items worn on the person or in conjunction with “clothing.” “Clothing accessories or equipment” does not include “clothing,” “sport or recreational equipment,” or “protective equipment.”

(iii) “Protective equipment” means items for human wear and designed as protection of the wearer against injury or disease or as protections against damage or injury of other persons or property but not suitable for general use. “Protective equipment” does not include “clothing,” “clothing accessories or equipment,” and “sport or recreational equipment.”

(iv) “Sport or recreational equipment” means items designed for human use and worn in conjunction with an athletic or recreational activity that are not suitable for general use. “Sport or recreational equipment” does not include “clothing,” “clothing accessories or equipment,” and “protective equipment.”

(g) Computer and Related Items

(i) “Computer” means an electronic device that accepts information in digital or similar form and manipulates it for a result based on a sequence of instructions.

(ii) “Computer software” means a set of coded instructions designed to cause a “computer” or automatic data processing equipment to perform a task.

(iii) “Delivered electronically” means delivered to the purchaser by means other than tangible storage media.

(iv) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

(v) “Load and leave” means delivery to the purchaser by use of a tangible storage media where the tangible storage media is not physically transferred to the purchaser.

(vi) “Prewritten computer software” means “computer software,” including prewritten upgrades, which is not designed and developed by the author or other creator to the specifications of a specific purchaser. The combining of two (2) or more “prewritten computer software” programs or prewritten portions thereof does not cause the combination to be other than “prewritten computer software.” “Prewritten computer software” includes software designed and developed by the author or other creator to the specifications of a specific purchaser when it is sold to a person other than the specific purchaser. Where a person modifies or enhances “computer software” of which the person is not the author or creator, the person shall be deemed to be the author or creator only of such person’s modifications or enhancements. “Prewritten computer software” or a prewritten portion thereof that is modified or enhanced to any degree, where such modification or enhancement is designed and developed to the specifications of a specific purchaser, remains “prewritten computer software;” provided, however, that where there is a reasonable, separately stated charge or an invoice or other statement of the price given to the purchaser for such modification or enhancement, such modification or enhancement shall not constitute “prewritten computer software.”

(h) Drugs and Related Items

(i) “Drug” means a compound, substance or preparation, and any component of a compound, substance or preparation, other than “food and food ingredients,” “dietary supplements” or “alcoholic beverages:”

(A) Recognized in the official United States Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States, or official National Formulary, and supplement to any of them; or

(B) Intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease; or

(C) Intended to affect the structure of any function of the body.

“Drug” shall also include blood, insulin and medical oxygen whether or not sold on prescription.

(ii) “Over-the-counter-drug” means a drug that contains a label that identifies the product as a drug as required by 21 C.F.R. § 201.66. The “over-the-counter-drug” label includes:

(A) A “Drug Facts” panel; or

(B) A statement of the “active ingredient(s)” with a list of those ingredients contained in the compound, substance or preparation.

“Over-the-counter-drug” shall not include “grooming and hygiene products.”

(iii) “Grooming and hygiene products” are soaps and cleaning solutions, shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and screens, regardless of whether the items meet the definition of “over-the-counter-drugs.”

(iv) “Prescription” means an order, formula or recipe issued in any form of oral, written, electronic, or other means of transmission by a duly licensed practitioner authorized by the laws of the member state.

(i) “Delivery charges” means charges by the seller of personal property or services for preparation and delivery to a location designated by the purchaser of personal property or services including, but not limited to, transportation, shipping, postage, handling, crating, and packing.

“Delivery charges” shall not include the charges for delivery of “direct mail” if the charges are separately stated on an invoice or similar billing document given to the purchaser.

(j) “Direct mail” means printed material delivered or distributed by United States mail or other delivery service to a mass audience or to addressees on a mailing list provided by the purchaser or at the direction of the purchaser when the cost of the items are not billed directly to the recipients. “Direct mail” includes tangible personal property supplied directly or indirectly by the purchaser to the direct mail seller for inclusion in the package containing the printed material. “Direct mail” does not include multiple items of printed material delivered to a single address.

(k) “Durable medical equipment” means equipment including repair and replacement parts for same which:

(i) Can withstand repeated use; and

(ii) Is primarily and customarily used to serve a medical purpose; and

(iii) Generally is not useful to a person in the absence of illness or injury; and

(iv) Is not worn in or on the body.

Durable medical equipment does not include mobility enhancing equipment.

(l) Food and Related Items

(i) “Food and food ingredients” means substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. “Food and food ingredients” does not include “alcoholic beverages,” “tobacco,” “candy,” “dietary supplements” and “soft drinks.”

(ii) “Prepared food” means:

(A) Food sold in a heated state or heated by the seller;

(B) Two (2) or more food ingredients mixed or combined by the seller for sale as a single item; or

(C) Food sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins, or straws. A plate does not include a container or packaging used to transport the food.

“Prepared food” in (B) does not include food that is only cut, repackaged, or pasteurized by the seller, and eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer as recommended by the Food and Drug Administration in chapter 3, part 401.11 of its Food Code so as to prevent food borne illnesses.

(iii) “Candy” means a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops, or pieces. “Candy” shall not include any preparation containing flour and shall require no refrigeration.

(iv) “Soft drinks” means non-alcoholic beverages that contain natural or artificial sweeteners. “Soft drinks” do not include beverages that contain milk or milk products, soy, rice or similar milk substitutes, or greater than fifty percent (50%) of vegetable or fruit juice by volume.

(v) “Dietary supplement” means any product, other than “tobacco,” intended to supplement the diet that:

(A) Contains one or more of the following dietary ingredients:

1. A vitamin;

2. A mineral;

3. An herb or other botanical;

4. An amino acid;

5. A dietary substance for use by humans to supplement the diet by increasing the total dietary intake; or

6. A concentrate, metabolite, constituent, extract, or combination of any ingredient described in above; and

(B) Is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such a form, is not represented as conventional food and is not represented for use as a sole item of a meal or of the diet; and

(C) Is required to be labeled as a dietary supplement, identifiable by the “Supplemental Facts” box found on the label and as required pursuant to 21 C.F.R. § 101.36.

(m) “Food sold through vending machines” means food dispensed from a machine or other mechanical device that accepts payment.

(n) “Hotel” means every building or other structure kept, used, maintained, advertised as or held out to the public to be a place where living quarters are supplied for pay to transient or permanent guests and tenants and includes a motel.

(i) “Living quarters” means sleeping rooms, sleeping or housekeeping accommodations, or any other room or accommodation in any part of the hotel, rooming house or tourist camp which is available for or rented out for hire in the lodging of guests.

(ii) “Rooming house” means every house, boat, vehicle, motor court or other structure kept, used, maintained, advertised or held out to the public to be a place where living quarters are supplied for pay to transient or permanent guests or tenants, whether in one or adjoining buildings.

(iii) “Tourist camp” means a place where tents or tent houses, or camp cottages, or cabins or other structures are located and offered to the public or any segment thereof for human habitation.

(o) “Lease or rental” means any transfer of possession or control of tangible personal property for a fixed or indeterminate term for consideration. A lease or rental may include future options to purchase or extend. Lease or rental does not include:

(i) A transfer of possession or control of property under a security agreement or deferred payment plan that requires the transfer of title upon completion of the required payments;

(ii) A transfer or possession or control of property under an agreement that requires the transfer of title upon completion of required payments and payment of an option price does not exceed the greater of one hundred dollars ($100) or one percent of the total required payments; or

(iii) Providing tangible personal property along with an operator for a fixed or indeterminate period of time. A condition of this exclusion is that the operator is necessary for the equipment to perform as designed. For the purpose of this subsection, an operator must do more than maintain, inspect, or set-up the tangible personal property.

(iv) Lease or rental does include agreements covering motor vehicles and trailers where the amount of consideration may be increased or decreased by reference to the amount realized upon sale or disposition of the property as defined in 26 USC 7701(h)(1).

(v) This definition shall be used for sales and use tax purposes regardless if a transaction is characterized as a lease or rental under generally accepted accounting principles, the Internal Revenue Code, the Uniform Commercial Code, or other provisions of federal, state or local law.

(vi) This definition will be applied only prospectively from the date of adoption and will have no retroactive impact on existing leases or rentals. This definition shall neither impact any existing sale-leaseback exemption or exclusions that a state may have, nor preclude a state from adopting a sale-leaseback exemption or exclusion after the effective date of the Agreement.

(p) “Mobility enhancing equipment” means equipment including repair and replacement parts to same, which:

(i) Is primarily and customarily used to provide or increase the ability to move from one place to another and which is appropriate for use either in a home or a motor vehicle; and

(ii) Is not generally used by persons with normal mobility; and

(iii) Does not include any motor vehicle or equipment on a motor vehicle normally provided by a motor vehicle manufacturer.

Mobility enhancing equipment does not include durable medical equipment.

(q) “Model 1 Seller” means a seller that has selected a CSP as its agent to perform all the seller’s sales and use tax functions, other than the seller’s obligation to remit tax on its own purchases.

(r) “Model 2 Seller” means a seller that has selected a CAS to perform part of its sales and use tax functions, but retains responsibility for remitting the tax.

(s) “Model 3 Seller” means a seller that has sales in at least five member states, has total annual sales revenue of at least five hundred million dollars ($500,000,000), has a proprietary system that calculates the amount of tax due each jurisdiction, and has entered into a performance agreement with the member states that establishes a tax performance standard for the seller. As used in this definition, a seller includes an affiliated group of sellers using the same proprietary system.

(t) “Prosthetic device” means a replacement, corrective, or supportive devices including repair and replacement parts for same worn on or in the body to:

(i) Artificially replace a missing portion of the body;

(ii) Prevent or correct physical deformity or malfunction; or

(iii) Support a weak or deformed portion of the body.

(u) “Purchaser” means a person to whom a sale of personal property is made or to whom a service is furnished.

(v) “Purchase price” applies to the measure subject to use tax and has the same meaning as sales price.

(w) “Seller” means a person making sales, leases, or rentals of personal property or services.

(x) “State” means any state of the United States and the District of Columbia.

(y) “Telecommunications” tax base/exemption terms

(i) Telecommunication terms shall be defined as follows:

(A) “Ancillary services” means services that are associated with or incidental to the provision of “telecommunications services”, including, but not limited to, “detailed telecommunications billing”, “directory assistance”, “vertical service”, and “voice mail services”.

(B) “Conference bridging service” means an “ancillary service” that links two (2) or more participants of an audio or video conference call and may include the provision of a telephone number. “Conference bridging service” does not include the “telecommunications services” used to reach the conference bridge.

(C) “Detailed telecommunications billing service” means an “ancillary service” of separately stating information pertaining to individual calls on a customer’s billing statement.

(D) “Directory assistance” means an “ancillary service” of providing telephone number information, and/or address information.

(E) “Vertical service” means an “ancillary service” that is offered in connection with one or more “telecommunications services”, which offers advanced calling features that allow customers to identify callers and to manage multiple calls and call connections, including “conference bridging services”.

(F) “Voice mail service” means an “ancillary service” that enables the customer to store, send or receive recorded messages. “Voice mail service” does not include any “vertical services” that the customer may be required to have in order to utilize the “voice mail service”.

(G) “Telecommunications service” means the electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals to a point, or between or among points. The term “telecommunications service” includes such transmission, conveyance, or routing in which computer processing applications are used to act on the form, code or protocol of the content for purposes of transmission, conveyance or routing without regard to whether such service is referred to as voice over Internet protocol services or is classified by the Federal Communications Commission as enhanced or value added. “Telecommunications service” does not include:

(1) Data processing and information services that allow data to be generated, acquired, stored, processed, or retrieved and delivered by an electronic transmission to a purchaser where such purchaser’s primary purpose for the underlying transaction is the processed data or information;

(2) Installation or maintenance of wiring or equipment on a customer’s premises;

(3) Tangible personal property;

(4) Advertising, including but not limited to, directory advertising.

(5) Billing and collection services provided to third parties;

(6) Internet access service;

(7) Radio and television audio and video programming services, regardless of the medium, including the furnishing of transmission, conveyance and routing of such services by the programming service provider. Radio and television audio and video programming services shall include, but not be limited to, cable service as defined in 47 USC 522(6) and audio and video programming services delivered by commercial mobile radio service providers, as defined in 47 CFR 20.3;

(8) “Ancillary services”; or

(9) Digital products “delivered electronically”, including, but not limited to, software, music, video, reading materials or ring tones.

(H) “800 service” means a “telecommunications service” that allows a caller to dial a toll-free number without incurring a charge for the call. The service is typically marketed under the name “800”, “855”, “866”, “877”, and “888” toll-free calling, and any subsequent numbers designated by the Federal Communications Commission.

(I) “900 service” means an inbound toll “telecommunications service” purchased by a subscriber that allows the subscriber’s customers to call in to the subscriber’s prerecorded announcement or live service. “900 service” does not include the charge for: collection services provided by the seller of the “telecommunications services” to the subscriber, or service or product sold by the subscriber to the subscriber’s customer. The service is typically marketed under the name “900 service,” and any subsequent numbers designated by the Federal Communications Commission.

(J) “Fixed wireless service” means a “telecommunications service” that provides radio communication between fixed points.

(K) “Mobile wireless service” means a “telecommunications service” that is transmitted, conveyed or routed regardless of the technology used, whereby the origination and/or termination points of the transmission, conveyance or routing are not fixed, including, by way of example only, “telecommunications services” that are provided by a commercial mobile radio service provider.

(L) “Paging service” means a “telecommunications service” that provides transmission of coded radio signals for the purpose of activating specific pagers; such transmissions may include messages and/or sounds.

(M) “Prepaid calling service” means the right to access exclusively “telecommunications services”, which must be paid for in advance and which enables the origination of calls using an access number of authorization code, whether manually or electronically dialed, and that is sold in predetermined units or dollars of which the number declines with use in a known amount.

(N) “Prepaid wireless calling service” means a “telecommunications service” that provides the right to utilize “mobile wireless service” as well as other non-telecommunications services including the download of digital products “delivered electronically”, content and “ancillary services”, which must be paid for in advance that is sold in predetermined units of dollars of which the number declines with use in a known amount.

(O) “Private communications service” means a telecommunications service that entitles the customer to exclusive or priority use of a communications channel or group of channels between or among termination points, regardless of the manner in which such channel or channels are connected, and includes switching capacity, extension lines, stations, and any other associated services that are provided in connection with the use of such channel or channels.

(P) “Value-added non-voice data service” means a service that otherwise meets the definition of “telecommunications services” in which computer processing applications are used to act on the form, content, code, or protocol of the information or data primarily for a purpose other than transmission, conveyance or routing.

(ii) “Modifiers of Sales Tax Base/Exemption Terms” – the following terms can be used to further delineate the type of “telecommunications service” to be taxed or exempted. The terms would be used with the broader terms and subcategories delineated above.

(A) “Coin-operated telephone service” means a “telecommunications service” paid for by inserting money into a telephone accepting direct deposits of money to operate.

(B) “International” means a “telecommunications service” that originates or terminates in the United States and terminates or originates outside the United States, respectively. United States includes the District of Columbia or a U.S. territory or possession.

(C) “Interstate” means a “telecommunications service” that originates in one United States state, or a United States territory or possession, and terminates in a different United States state or a United States territory or possession.

(D) “Intrastate” means a “telecommunications service” that originates in one United States state or a United States territory or possession, and terminates in the same United States state or a United States territory or possession.

(E) “Pay telephone service” means a “telecommunications service” provided through any pay telephone.

(F) “Residential telecommunications service” means a “telecommunications service” or “ancillary services” provided to an individual for personal use at a residential address, including an individual dwelling unit such as an apartment. In the case of institutions where individuals reside, such as schools or nursing homes, “telecommunications service” is considered residential if it is provided to and paid for by an individual resident rather than the institution.

The terms “ancillary services” and “telecommunications service” are defined as a broad range of services. The terms “ancillary services” and “telecommunications service” are broader than the sum of the subcategories. Definitions of subcategories of “ancillary services” and “telecommunications service” can be used by a member state alone or in combination with other subcategories to define a narrower tax base than the definitions of “ancillary services” and “telecommunications service” would imply. The subcategories can also be used by a member state to provide exemptions for certain subcategories of the more broadly defined terms.

A member state that specifically imposes tax on, or exempts from tax, local telephone or local telecommunications service may define “local service” in any manner in accordance with Section 44-18.1-28, except as limited by other sections of this Agreement.

(z) “Tobacco” means cigarettes, cigars, chewing or pipe tobacco, or any other item that contains tobacco.

44-18-7.2. Sales Tax Holiday Definitions.-- The definitions in this part are only applicable for the purpose of administration of a sales tax holiday, as defined in Section 44‑18.1-23.

(a) “Eligible property” means an item of a type, such as clothing, that qualifies for a sales tax holiday exemption in a member state.

(b) “Layaway sale” means a transaction in which property is set aside for future delivery to a customer who makes a deposit, agrees to pay the balance of the purchase price over a period of time, and, at the end of the payment period, receives the property. An order is accepted for layaway by the seller, when the seller removes the property from normal inventory or clearly identifies the property as sold to the purchaser.

(c) “Rain check” means the seller allows a customer to purchase an item at a certain price at a later time because the particular item was out of stock.

(d) “School supply” is an item commonly used by a student in a course of study. The term is mutually exclusive of the terms “school art supply,” “school instructional material,” and “school computer supply,” and may be taxed differently. The following is an all-inclusive list:

(i) binders;

(ii) book bags;

(iii) calculators;

(iv) cellophane tape;

(v) blackboard chalk;

(vi) compasses;

(vii) composition books;

(viii) crayons;

(ix) erasers;

(x) folders; expandable, pocket, plastic and manila;

(xi) glue, paste and paste sticks;

(xii) highlighters;

(xiii) index cards;

(xiv) index card boxes;

(xv) legal pads;

(xvi) lunch boxes;

(xvii) markers;

(xviii) notebooks;

(xix) paper; loose leaf ruled notebook paper, copy paper, graph paper, tracing paper, manila paper, colored paper, poster board and construction paper;

(xx) pencil boxes and other school supply boxes;

(xxi) pencil sharpeners;

(xxii) pencils;

(xxiii) pens;

(xxiv) protractors;

(xxv) rulers;

(xxvi) scissors; and

(xxvii) writing tablets.

(e) “School art supply” is an item commonly used by a student in a course of study for artwork. The term is mutually exclusive of the terms “school supply,” “school instructional material,” and “school computer supply,” and may be taxed differently. The following is an all-inclusive list:

(i) clay and glazes;

(ii) paints; acrylic, tempora and oil;

(iii) paintbrushes for artwork;

(iv) sketch and drawing pads; and

(v) watercolors

(f) “School instructional material” is written material commonly used by a student in a course of study as a reference and to learn the subject being taught. The term is mutually exclusive of the terms “school supply,” “school art supply,” and “school computer supply,” and may be taxed differently. The following is an all-inclusive list:

(i) reference books;

(ii) reference maps and globes;

(iii) textbooks; and

(iv) workbooks.

(g) “School computer supply” is an item commonly used by a student in a course of study in which a computer is used. The term is mutually exclusive of the terms “school supply,” “school art supply,” and “school instructional material,” and may be taxed differently. The following is an all-inclusive list:

(i) computer storage media; diskettes, compact disks;

(ii) handheld electronic schedulers, except devices that are cellular phones;

(iii) personal digital assistants, except devices that are cellular phones;

(iv) computer printers; and

(v) printer supplies for computers; printer paper, printer ink.

44-18-12.1. “Additional measure subject to tax.”— Also included in the measure subject to tax under this chapter is the total amount charged for the furnishing or distributing of electricity, natural gas, artificial gas, steam, refrigeration, water, telecommunications, telegraph, cable, and radio message service, community antenna television, subscription television, and cable television service; provided, that the measure of tax in regard to telecommunications service is the total consideration received for the service as defined in 44‑18‑7(9); provided, that in order to prevent multistate taxation of all telecommunications service, any taxpayer is allowed a credit or refund of sales tax upon presenting proof that a tax has been paid to another state to which the tax is properly due for the identical service taxed under this chapter. Furthermore, included in the measure of tax is the total amount charged for the rental of living quarters in any hotel, rooming house, or tourist camp.

44-18-19.1. Direct Pay Permit. -- (a) A business that regularly purchases goods and services for use both within and outside this state may, at its option, apply to the tax administrator for a Direct Pay Permit. The holder of a direct pay permit shall be authorized to make payment of sales and use tax on purchases of goods and services directly to the division of taxation in lieu of payment to the seller. Said permit shall be valid for a twenty-four (24) month period subject to renewal.

(b) The issuance of a direct pay permit is subject to the discretion of the tax administrator. Prior to issuance of said permit the tax administrator must be satisfied that such an action shall not jeopardize the collection of tax.

(c) The tax administrator shall publish regulations regarding the conditions upon which a direct pay permit shall issue.

SECTION 11. Section 44-19-10 of the general laws in chapter 44-19 entitled “Sales and Use Taxes – Enforcement and Collection” is hereby amended to read as follows:

44-19-10. Monthly returns and payments -- Monthly reports by show promoters.-—Except as provided in the Streamlined Sales and Use Tax Agreement contained in Chapter 44-18.1 (a)(1) The the taxes imposed by chapter 18 of this title are due and payable to the tax administrator monthly on or before the twentieth day of the month next succeeding the month for which return is required to be made. On or before the twentieth (20th) day of each month, a return for the previous month shall be filed with the tax administrator in a form that the tax administrator may prescribe. For purposes of the sales tax a return shall be filed by every person engaged in the business of making retail sales, the gross receipts from which are required to be included in the measure of the sales tax. The tax administrator may require the filing of a return by any person holding a permit as provided in § 44-19-2 or 44-19-3. For purposes of the use tax a return shall be filed by every retailer maintaining a place of business in the state and by every person purchasing tangible personal property, the storage, use, or other consumption of which is subject to the use tax, who has not paid the use tax due to a retailer required to collect the tax.

(2) The return shall be in a form, include information, and bear any signatures that the tax administrator may require. At the time of the filing of any return required under this chapter the taxpayer shall pay to the tax administrator the tax due for the month covered by that return. For the purposes of the sales tax, gross receipts from rentals or leases of tangible personal property are reported and the tax paid in the manner required by the tax administrator. The tax administrator for good cause may extend, for not to exceed one (1) month, the time for making any return or paying any amount required to be paid under this chapter. Any person to whom an extension is granted, shall pay, in addition to the tax, interest at the annual rate prescribed by § 44-1-7, as amended, or fraction of it, from the date on which the tax would have been due without the extension until the date of payment.

(3) Where a taxpayer's sales and use tax liability for six (6) consecutive months has averaged less than two hundred dollars ($200) per month, a quarterly return and remittances in lieu of a monthly return may be made on or before the last day of July, October, January and April of each year for the preceding three (3) months' period when specially authorized in writing by the tax administrator under those rules and regulations as may be prescribed by the administrator. In the event that a taxpayer filing his or her return on a quarterly basis, as provided in this section, becomes delinquent in either the filing of his or her return or the payment of the taxes due, or in the event that the liability of a taxpayer, who has been authorized to file his or her return and to make payments on a quarterly basis, exceeds six hundred dollars ($600) in sales and use taxes for any subsequent quarter, or in the event that the tax administrator determines that any quarterly filing of return and payment of tax due thereon would unduly jeopardize the proper administration of the provisions of this chapter or of chapter 18 of this title, the tax administrator may, at any time, revoke the authorization, in which case the taxpayer will then be required to file his or her return and to pay the tax due in the manner provided for in this section.

(b) Every promoter shall file a report monthly, within twenty (20) days after the end of the prior month, for each show which the promoter operates, listing the date and place of each show and the name, address and permit number, by show, of every person whom the promoter permitted to display or sell tangible personal property, services or food and drink. Every person shall furnish the promoter of any show at which the person displays or sells tangible personal property, services or food and drink, information for the promoter's use in filing the report required by this subsection.

SECTION 12. Title 44 of the General Laws entitled “Taxation” is hereby amended by adding thereto the following chapter:

CHAPTER 44-18.1

ADOPTION OF THE STREAMLINED SALES AND USE TAX AGREEMENT

44-18.1-1. Adoption of streamlined sales and use tax agreement–Regulations. — Rhode Island adopts the Streamlined Sales And Use Tax Agreement as created on November 12, 2002 and amended, by the member states of the Streamlined Sales Tax Project. The entire Agreement is adopted by reference with the exception of articles III, IV and VI which are adopted as set out in this chapter. The tax administrator shall promulgate rules and regulations necessary to be in compliance with the provisions of this Agreement.

44-18.1-1.1. “Member State” defined. -- For the purposes of Section 44-18.1, the term “member state” shall include the State of Rhode Island.

44-18.1-2. State Level Administration. -- Each member state shall provide state level administration of sales and use taxes. The state level administration may be performed by a member state’s tax commission, department of revenue, or any other single entity designated by state law. Sellers are only required to register with, file returns with, and remit funds to the state level authority. Each member state shall provide for collection of any local taxes and distribution of them to the appropriate taxing jurisdictions. Each member state shall conduct, or authorize others to conduct on its behalf, all audits of the sellers registered under the Agreement for that state’s tax and the tax of its local jurisdictions, and local jurisdictions shall not conduct independent sales or use tax audits of sellers registered under the Agreement.

44-18.1-3. State and Local Tax Bases. — Through December 31, 2005, if a member state has local jurisdictions that levy a sales or use tax, all local jurisdictions in the state shall have a common tax base. After December 31, 2005, the tax base for local jurisdictions shall be identical to the state tax base unless otherwise prohibited by federal law. This section does not apply to sales or use taxes levied on the retail sale or transfer of motor vehicles, aircraft, watercraft, modular homes, manufactured homes, or mobile homes.

44-18.1-4. Seller Registration. — Each member state shall participate in an online sales and use tax registration system in cooperation with the other member states. Under this system:

(A) A seller registering under the Agreement is registered in each of the member states.

(B) The member states agree not to require the payment of any registration fees or other charge for a seller to register in a state in which the seller has no legal requirement to register.

(C) A written signature from the seller is not required.

(D) An agent may register a seller under uniform procedures adopted by the member states.

(E) A seller may cancel its registration under the system at any time under uniform procedures adopted by the governing board. Cancellation does not relieve the seller of its liability for remitting to the proper states any taxes collected.

44-18.1-5. Notice for State Tax Changes. — (A) Each member state shall lessen the difficulties faced by sellers when there is a change in a state sales or use tax rate or base by making a reasonable effort to do all of the following:

(1) Provide sellers with as much advance notice as practicable of a rate change.

(2) Limit the effective date of a rate change to the first day of a calendar quarter.

(3) Notify sellers of legislative changes in the tax base and amendments to sales and use tax rules and regulations.

(B) Failure of a seller to receive notice or failure of a member state to provide notice or limit the effective date of a rate change shall not relieve the seller of its obligation to collect sales or use taxes for that member state.

44-18.1-6. Local Rate and Boundary Changes. — Each member state that has local jurisdictions that levy a sales or use tax shall:

(A) Provide that local rate changes will be effective only on the first day of a calendar quarter after a minimum of sixty days’ notice to sellers.

(B) Apply local sales tax rate changes to purchases from printed catalogs wherein the purchaser computed the tax based upon local tax rates published in the catalog only on the first day of a calendar quarter after a minimum of one hundred twenty days’ notice to sellers.

(C) For sales and use tax purposes only, apply local jurisdiction boundary changes only on the first day of a calendar quarter after a minimum of sixty days’ notice to sellers.

(D) Provide and maintain a database that describes boundary changes for all taxing jurisdictions. This database shall include a description of the changes and the effective date of the change for sales and use tax purposes.

(E) Provide and maintain a database of all sales and use tax rates for all of the jurisdictions levying taxes within the state. For the identification of states, counties, cities, and parishes, codes corresponding to the rates must be provided according to Federal Information Processing Standards (FIPS) as developed by the National Institute of Standards and Technology. For the identification of all other jurisdictions, codes corresponding to the rates must be in the format determined by the governing board.

(F) Provide and maintain a database that assigns each five digit and nine digit zip code within a member state to the proper tax rates and jurisdictions. The state must apply the lowest combined tax rate imposed in the zip code area if the area includes more than one tax rate in any level of taxing jurisdictions. If a nine digit zip code designation is not available for a street address or if a seller or CSP is unable to determine the nine digit zip code designation applicable to a purchase after exercising due diligence to determine the designation, the seller or CSP may apply the rate for the five digit zip code area. For the purposes of this section, there is a rebuttable presumption that a seller or CSP has exercised due diligence if the seller has attempted to determine the nine digit zip code designation by utilizing software approved by the governing board that makes this designation from the street address and the five digit zip code applicable to a purchase.

(G) Have the option of providing address-based boundary database records for assigning taxing jurisdictions and their associated rates which shall be in addition to the requirements of subsection (F) of this section. The database records must be in the same approved format as the database records pursuant to subsection (F) of this section and must meet the requirements developed pursuant to the federal Mobile Telecommunications Sourcing Act (4 U.S.C. Sec. 119(a)). The governing board may allow a member state to require sellers that register under this Agreement to use an address‑based database provided by that member state. If any member state develops address‑based assignment database records pursuant to the Agreement, a seller or CSP may use those database records in place of the five and nine-digit zip code database records provided for in subsection (F) of this section. If a seller or CSP is unable to determine the applicable rate and jurisdiction using an address-based database record after exercising due diligence, the seller or CSP may apply the nine digit zip code designation applicable to a purchase. If a nine-digit zip code designation is not available for a street address or if a seller or CSP is unable to determine the nine digit zip code designation applicable to a purchase after exercising due diligence to determine the designation, the seller or CSP may apply the rate for the five digit zip code area. For the purposes of this section, there is a rebuttable presumption that a seller or CSP has exercised due diligence if the seller or CSP has attempted to determine the tax rate and jurisdiction by utilizing software approved by the governing board that makes this assignment from the address and zip code information applicable to the purchase.

(H) States that have met the requirements of subsection (F) may also elect to certify vendor provided address-based databases for assigning tax rates and jurisdictions. The databases must be in the same approved format as the database records pursuant to (G) of this section and must meet the requirements developed pursuant to the federal Mobil Telecommunications Sourcing Act (4 U.S.C.A. Sec. 119(a))). If a state certifies a vendor address-based database, a seller or CSP may use that database in place of the database provided for in subsection (F) or (G) of this section. Vendors providing address-based databases may request certification of their databases from the governing board. Certification by the governing board does not replace the requirement that the databases be certified by the states individually.

44-18.1-7. Relief from Certain Liability. -- Each member state shall relieve sellers and CSPs using databases pursuant to subsections (F), (G) and (H) of Section 44-18-1.6 from liability to the member state and local jurisdictions for having charged and collected the incorrect amount of sales or use tax resulting from the seller or CSP relying on erroneous data provided by a 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 pursuant to Section 44-18.1-6, subsection (G) or (H) may cease providing liability relief for errors resulting from the reliance on the database provided by the member state under the provisions of Section 44-18.1-6, subsection (F). If a seller demonstrates that requiring the use of the address-based database would create an undue hardship, a member state and the governing board may extend the relief from liability to such seller for a designated period of time.

44-18.1-8. Database Requirements and Exceptions. — (A) The electronic databases provided for in Section 44-18.1-6, subsections (D), (E), (F), and (G) shall be in a downloadable format approved by the governing board. The databases may be directly provided by the state or provided by a vendor as designated by the state. A database provided by a vendor as designated by a state shall be applicable to and subject to all provisions of Section 44-18.1-6 and 44-18.1-7 and this section. These databases must be provided at no cost to the user of the database.

(B) The provisions of Section 44-18.1-6, subsections (F) and (G) do not apply when the purchased product is received by the purchaser at the business location of the seller.

(C) The databases provided by Section 44-18.1-6, subsections (D), (E), (F), and (G) are not a requirement of a state prior to entering into the Agreement. A seller that did not have a requirement to register in a state prior to registering pursuant to this Agreement or a CSP shall not be required to collect sales or use taxes for a state until the first day of the calendar quarter commencing more than sixty days after the state has provided the databases required by Section 44-18.1-6, subsections (D), (E) and (F).

44-18.1-9. State and Local Tax Rates. — (A) No member state shall have multiple state sales and use tax rates on items of personal property or services after December 31, 2005, except that a member state may impose a single additional rate, which may be zero, on food and food ingredients and drugs as defined by state law pursuant to the Agreement.

(B) A member state that has local jurisdictions that levy a sales or use tax shall not have more than one local sales tax rate or more than one local use tax rate per local jurisdiction. If the local jurisdiction levies both a sales tax and use tax, the local rates must be identical.

(C) The provisions of this section do not apply to sales or use taxes levied on electricity, piped natural or artificial gas, or other heating fuels delivered by the seller, or the retail sale or transfer of motor vehicles, aircraft, watercraft, modular homes, manufactured homes, or mobile homes.

44-18.1-10. Application of General Sourcing Rules and Exclusions from the Rules. — (A) Each member state shall agree to require sellers to source the retail sale of a product in accordance with Section 44-18.1-11. The provisions of Section 44-18.1-11 apply regardless of the characterization of a product as tangible personal property, a digital good, or a service. The provisions of Section 44-18.1-11 only apply to determine a seller’s obligation to pay or collect and remit a sales or use tax with respect to the seller’s retail sale of a product. These provisions do not affect the obligation of a purchaser or lessee to remit tax on the use of the product to the taxing jurisdictions of that use.

(B) Section 44-18.1-11 does not apply to sales or use taxes levied on the following:

(1) The retail sale or transfer of watercraft, modular homes, manufactured homes, or mobile homes. These items must be sourced according to the requirements of each member state.

(2) The retail sale, excluding lease or rental, of motor vehicles, trailers, semi-trailers, or aircraft that do not qualify as transportation equipment, as defined in Section 44-18.1-11, subsection (D). The retail sale of these items shall be sourced according to the requirements of each member state, and the lease or rental of these items must be sourced according to Section 44-18.1-11, subsection (C).

(3) Telecommunications services, as set out in Section 44-18.1-16, shall be sourced in accordance with Section 44-18.1-15.

(4) Until December 31, 2007, florist sales as defined by each member state. Prior to this date, these items must be sourced according to the requirements of each member state.

44-18.1-11. General Sourcing Rules. — (A) The retail sale, excluding lease or rental, of a product shall be sourced as follows:

(1) When the product is received by the purchaser at a business location of the seller, the sale is sourced to that business location.

(2) When the product is not received by the purchaser at a business location of the seller, the sale is sourced to the location where receipt by the purchaser (or the purchaser’s donee, designated as such by the purchaser) occurs, including the location indicated by instructions for delivery to the purchaser (or donee), known to the seller.

(3) When subsections (A)(1) and (A)(2) do not apply, the sale is sourced to the location indicated by an address for the purchaser that is available from the business records of the seller that are maintained in the ordinary course of the seller’s business when use of this address does not constitute bad faith.

(4) When subsections (A)(1), (A)(2) and (A)(3) do not apply, the sale is sourced to the location indicated by an address for the purchaser obtained during the consummation of the sale, including the address of a purchaser’s payment instrument, if no other address is available, when use of this address does not constitute bad faith.

(5) When none of the previous rules of subsections (A)(1), (A)(2), (A)(3), or (A)(4) apply, including the circumstance in which the seller is without sufficient information to apply the previous rules, then the location will be determined by the address from which tangible personal property was shipped, from which the digital good or the computer software delivered electronically was first available for transmission by the seller, or from which the service was provided (disregarding for these purposes any location that merely provided the digital transfer of the product sold).

(B) The lease or rental of tangible personal property, other than property identified in subsection (C) or subsection (D), shall be sourced as follows:

(1) For a lease or rental that requires recurring periodic payments, the first periodic payment is sourced the same as a retail sale in accordance with the provisions of subsection (A). Periodic payments made subsequent to the first payment are sourced to the primary property location for each period covered by the payment. The primary property location shall be as indicated by an address for the property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business, when use of this address does not constitute bad faith. The property location shall not be altered by intermittent use at different locations, such as use of business property that accompanies employees on business trips and service calls.

(2) For a lease or rental that does not require recurring periodic payments, the payment is sourced the same as a retail sale in accordance with the provisions of subsection (A).

(3) This subsection does not affect the imposition or computation of sales or use tax on leases or rentals based on a lump sum or accelerated basis, or on the acquisition of property for lease.

(C) The lease or rental of motor vehicles, trailers, semi-trailers, or aircraft that do not qualify as transportation equipment, as defined in subsection (D), shall be sourced as follows:

(1) For a lease or rental that requires recurring periodic payments, each periodic payment is sourced to the primary property location. The property location shall be as indicated by an address for the property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business, when use of this address does not constitute bad faith. This location shall not be altered by intermittent use at different locations.

(2) For a lease or rental that does not require recurring periodic payments, the payment is sourced the same as a retail sale in accordance with the provisions of subsection (A).

(3) This subsection does not affect the imposition or computation of sales or use tax on leases or rentals based on a lump sum or accelerated basis, or on the acquisition of property for lease.

(D) The retail sale, including lease or rental, of transportation equipment shall be sourced the same as a retail sale in accordance with the provisions of subsection (A), notwithstanding the exclusion of lease or rental in subsection (A). “Transportation equipment” means any of the following:

(1) Locomotives and railcars that are utilized for the carriage of persons or property in interstate commerce.

(2) Trucks and truck-tractors with a Gross Vehicle Weight rating (GVWR) or 10,001 pounds or greater, trailers, semi-trailers, or passenger buses that are:

(a) Registered through the International Registration Plan; and

(b) Operated under authority of a carrier authorized and certificated by the U.S. Department of Transportation or another federal authority to engage in the carriage of persons or property in interstate commerce.

(3) Aircraft that are operated by air carriers authorized and certificated by the U.S. Department of Transportation or another federal or a foreign authority to engage in the carriage of persons or property in interstate or foreign commerce.

(4) Containers designed for use on and component parts attached or secured on the items set forth in subsection (D)(1) through (D)(3).

44-18.1-12. General Sourcing Definitions. — For the purposes of Section 44-18.1-11, subsection (A), the terms “receive” and “receipt” mean:

(A) Taking possession of tangible personal property,

(B) Making first use of services, or

(C) Taking possession or making first use of digital goods, whichever comes first. The terms “receive” and “receipt” do not include possession by a shipping company on behalf of the purchaser.

44-18.1-13. Multiple Points of Use. — (A) Notwithstanding the provisions of Section 44‑18.1-11, a business purchaser that is not a holder of a direct pay permit that knows at the time of its purchase of a digital good, computer software, or a service that the digital good, computer software, or service will be concurrently available for use in more than one jurisdiction shall deliver to the seller in conjunction with its purchase an exemption certificate claiming multiple points of use or meet the requirements of Section 44-18.1-13, subsections (B) or (C). Computer software, for purposes of this section includes, but is not limited to computer software delivered electronically, by load and leave, or in tangible form. Computer software received in-person by a business purchaser at a business location of the seller is not included.

Upon receipt of an exemption certificate claiming multiple points of use, the seller is relieved of all obligation to collect, pay, or remit the applicable tax and the purchaser shall be obligated to collect, pay, or remit the applicable tax on a direct pay basis.

(2) A purchaser delivering an exemption certificate claiming multiple points of use may use any reasonable, but consistent and uniform, method of apportionment that is supported by the purchaser’s books and records as they exist at the time the transaction is reported for sales or use tax purposes.

(3) A purchaser delivering an exemption certificate claiming multiple points of use shall report and pay the appropriate tax to each jurisdiction where concurrent use occurs. The tax due will be calculated as if the apportioned amount of the digital good, computer software or service had been delivered to each jurisdiction to which the sale is apportioned pursuant to Section 44-18.1-13, subdivision (A)(2).

(4) The exemption certificate claiming multiple points of use will remain in effect for all future sales by the seller to the purchaser (except as to the subsequent sale’s specific apportionment that is governed by the principles of Section 44-18.1-13, subdivisions (A)(2) and (A)(3)) until it is revoked in writing.

(B) Notwithstanding Section 44-18.1-13, subsection (A), when the seller knows that the product will be concurrently available for use in more than one jurisdiction, but the purchaser does not provide an exemption certificate claiming multiple points of use as required in subsection (A), the seller may work with the purchaser to produce the correct apportionment. The purchaser and seller may use any reasonable, but consistent and uniform, method of apportionment that is supported by the seller’s and purchaser’s business records as they exist at the time the transaction is reported for sales or use tax purposes. If the purchaser certifies to the accuracy of the apportionment and the seller accepts the certification, the seller shall collect and remit the tax pursuant to Section 44-18.1-13, subdivision (A)(3). In the absence of bad faith, the seller is relieved of any further obligation to collect tax on any transaction where the seller has collected tax pursuant to the information certified by the purchaser.

(C) When the seller knows that the product will be concurrently available for use in more than one jurisdiction and the purchaser does not have a direct pay permit and does not provide the seller with an exemption certificate claiming multiple points of use exemption as required in Section 44-18.1-13, subsection (A), or certification pursuant to Section 44-18.1-13, subsection (B), the seller shall collect and remit the tax based on the provisions of Section 44-18.1-11.

(D) A holder of a direct pay permit shall not be required to deliver an exemption certificate claiming multiple points of use to the seller. A direct pay permit holder shall follow the provisions of Section 44-18.1-13, subdivisions (A)(2) and (A)(3) of this section in apportioning the tax due on a digital good, computer software, or a service that will be concurrently available for use in more than one jurisdiction.

(E) Nothing in this section shall limit a person’s obligation for sales or use tax to any state in which the qualifying purchases are concurrently available for use, nor limit a person’s ability under local, state, federal, or constitutional law, to claim a credit for sales or use taxes legally due and paid to other jurisdictions.

44-18.1-14. Direct Mail Sourcing. — (A) Notwithstanding Section 44-18.1-11, a purchaser of direct mail that is not a holder of a direct pay permit shall provide to the seller in conjunction with the purchase a Direct Mail Form or information to show the jurisdictions to which the direct mail is delivered to recipients.

(1) Upon receipt of the Direct Mail Form, the seller is relieved of all obligations to collect, pay, or remit the applicable tax and the purchaser is obligated to pay or remit the applicable tax on a direct pay basis. A Direct Mail Form shall remain in effect for all future sales of direct mail by the seller to the purchaser until it is revoked in writing.

(2) Upon receipt of information from the purchaser showing the jurisdictions to which the direct mail is delivered to recipients, the seller shall collect the tax according to the delivery information provided by the purchaser. In the absence of bad faith, the seller is relieved of any further obligation to collect tax on any transaction where the seller has collected tax pursuant to the delivery information provided by the purchaser.

(B) If the purchaser of direct mail does not have a direct pay permit and does not provide the seller with either a Direct Mail Form or delivery information, as required by subsection (A) of this section, the seller shall collect the tax according to Section 44-18.1-11, subsection (A)(5). Nothing in this paragraph shall limit a purchaser’s obligation for sales or use tax to any state to which the direct mail is delivered.

(C) If a purchaser of direct mail provides the seller with documentation of direct pay authority, the purchaser shall not be required to provide a Direct Mail Form or delivery information to the seller.

44-18.1-15. Telecommunication Sourcing Rule. — (A) Except for the defined telecommunication services in subsection (C), the sale of telecommunication service sold on a call-by-call basis shall be sourced to (I) each level of taxing jurisdiction where the call originates and terminates in that jurisdiction or (ii) each level of taxing jurisdiction where the call either originates or terminates and in which the service addressed is also located.

(B) Except for the defined telecommunication services in subsection (C), a sale of telecommunications services sold on a basis other than a call-by-call basis, is sourced to the customer’s place of primary use.

(C) The sale of the following telecommunication services shall be sourced to each level of taxing jurisdiction as follows:

(1) A sale of mobile telecommunications services other than air-to-ground radiotelephone service and prepaid calling service, is sourced to the customer’s place of primary use as required by the Mobile Telecommunications Sourcing Act.

(2) A sale of post-paid calling service is sourced to the origination point of the telecommunications signal as first identified by either (i) the seller’s telecommunications system, or (ii) information received by the seller from its service provider, where the system used to transport such signals is not that of the seller.

(3) A sale of prepaid calling service or a sale of a prepaid wireless calling service is sourced in accordance with Section 44-18.1-11. Provided however, in the case of a sale of a prepaid wireless calling service, the rule provided in Section 44-18.1-11, subsection (A)(5) shall include as an option the location associated with the mobile telephone number.

(4) A sale of a private communication service is sourced as follows:

(a) Service for a separate charge related to a customer channel termination point is sourced to each level of jurisdiction in which such customer channel termination point is located.

(b) Service where all customer termination points are located entirely within one jurisdiction or levels of jurisdiction is sourced in such jurisdiction in which the customer channel termination points are located.

(c) Service for segments of a channel between two customer channel termination points located in different jurisdictions and which segment of channel are separately charged is sourced fifty percent in each level of jurisdiction in which the customer channel termination points are located.

(d) Service for segments of a channel located in more than one jurisdiction or levels of jurisdiction and which segments are not separately billed is sourced in each jurisdiction based on the percentage determined by dividing the number of customer channel termination points in such jurisdiction by the total number of customer channel termination points.

44-18.1-16. Telecommunication Sourcing Definitions. — For the purpose of Section 44‑18.1-15 and 44-18-7, the following definitions apply:

(A) “Air-to-Ground Radiotelephone service” means a radio service, as that term is defined in 47 CFR 22.99, in which common carriers are authorized to offer and provide radio telecommunications service for hire to subscribers in aircraft.

(B) “Call-by-call Basis” means any method of charging for telecommunications services where the price is measured by individual calls.

(C) “Communications Channel” means a physical or virtual path of communications over which signals are transmitted between or among customer channel termination points.

(D) “Customer” means the person or entity that contracts with the seller of telecommunications services. If the end user of telecommunications services is not the contracting party, the end user of the telecommunications service is the customer of the telecommunication service, but this sentence only applies for the purpose of sourcing sales of telecommunications services under Section 44-18.1-15. “Customer” does not include a reseller of telecommunications service or for mobile telecommunications service of a serving carrier under an agreement to serve the customer outside the home service provider’s licensed service area.

(E) “Customer Channel Termination Point” means the location where the customer either inputs or receives the communications.

(F) “End user” means the person who utilizes the telecommunication service. In the case of an entity, “end user” means the individual who utilizes the service on behalf of the entity.

(G) “Home service provider” means the same as that term is defined in Section 124(5) of Public Law 106-252 (Mobile Telecommunications Sourcing Act).

(H) “Mobile telecommunications service” means the same as that term is defined in Section 124(7) of Public Law 106-252 (Mobile Telecommunications Sourcing Act).

(I) “Place of primary use” means the street address representative of where the customer’s use of the telecommunications service primarily occurs, which must be the residential street address or the primary business street address of the customer. In the case of mobile telecommunications services, “place of primary use” must be within the licensed service area of the home service provider.

(J) “Post-paid calling service” means the telecommunications service obtained by making a payment on a call-by-call basis either through the use of a credit card or payment mechanism such as a bank card, travel card, credit card, or debit card, or by charge made to a telephone number which is not associated with the origination or termination of the telecommunications service. A post-paid calling service includes a telecommunications service, except a prepaid wireless calling service, that would be a prepaid calling service except it is not exclusively a telecommunication service.

(K) “Service address” means:

(1) The location of the telecommunications equipment to which a customer’s call is charged and from which the call originates or terminates, regardless of where the call is billed or paid.

(2) If the location in subsection (K)(1) is not known, service address means the origination point of the signal of the telecommunications services first identified by either the seller’s telecommunications system or in information received by the seller from its service provider, where the system used to transport such signals is not that of the seller.

(3) If the location in subsection (K)(1) and subsection (K)(2) are not known, the service address means the location of the customer’s place of primary use.

44-18.1-17. Enactment of Exemptions. — (a) For the purpose of this section and section 44-18.1-18, the following definitions apply:

(1) Entity-Based Exemption. An exemption based on who purchases the product or who sells the product. An exemption that is available to all individuals shall not be considered an entity-based exemption.

(2) Product-Based Exemption. An exemption based on the description of the product and not based on who purchases the product or how the purchaser intends to use the product.

(3) Use-Based Exemption. An exemption based on a specified use of the product by the purchaser.

(b) A member state shall enact entity-based, use-based and product-based exemptions in accordance with the provisions of this section and shall utilize common definitions in accordance with the provisions of this section and shall utilize common definitions in accordance with the provisions of Section 44-18.1-28 and Library of Definitions in Appendix C of the Streamlined Sales and Use Tax Agreement.

(c)(1) A member state may enact a product-based exemption without restriction if Part II of the Library of Definitions does not have a definition for such product.

(2) A member state may enact a product-based exemption for a product if Part II of the Library of Definitions has a definition for such product and the member state utilizes in the exemption the product definition in a manner consistent with Part II of the Library of Definitions and Section 44-18.1-28.

(3) A member state may enact a product-based exemption exempting all items included within a definition in Part II of the Library of Definitions but shall not exempt specific items included within the product definition unless the product definition sets out an exclusion for such item.

(d)(1) A member state may enact an entity-based or a use-based exemption for a product without restriction if Part II of the Library of Definitions does not have a definition for such product.

(2) A member state may enact an entity-based or a use-based exemption for a product if Part II of the Library of Definitions has a definition for such product and the member state utilizes in the exemption the product definition in a manner consistent with Part II of the Library of Definitions and Section 44-18.1-28 of this Agreement.

(3) A member state may enact an entity-based exemption for an item if Part II of the Library of Definitions does not have a definition for such item but has a definition for a product that includes such item.

(4) A member state may not enact a use-based exemption for an item which effectively constitutes a product-based exemption if Part II of the Library of Definitions has a definition for a product that includes such item.

(5) A member state may enact a use-based exemption for an item if Part II of the Library of Definitions has a definition for a product that includes such item, if not prohibited in Subsection (C)(4) of this section and if consistent with the definition in Part II of the Library of Definitions.

(e) For purposes of complying with the requirements in this section, the inclusion of a product within the definition of tangible personal property is disregarded.

44-18.1-18. Administration of Exemptions. — (A) Each member state shall observe the following provisions when a purchaser claims an exemption:

(1) The seller shall obtain identifying information of the purchaser and the reason for claiming a tax exemption at the time of the purchase as determined by the governing board.

(2) A purchaser is not required to provide a signature to claim an exemption from tax unless a paper exemption certificate is used.

(3) The seller shall use the standard form for claiming an exemption electronically as adopted by the governing board.

(4) The seller shall obtain the same information for proof of a claimed exemption regardless of the medium in which the transaction occurred.

(5) A member state may utilize a system wherein the purchaser exempt from the payment of the tax is issued an identification number that shall be presented to the seller at the time of the sale.

(6) The seller shall maintain proper records of exempt transactions and provide them to a member state when requested.

(7) A member state shall administer use-based and entity-based exemptions when practicable through a direct pay permit, an exemption certificate, or other means that does not burden sellers.

(8) After December 31, 2007, in the case of drop shipment sales, member states must allow a third party vendor (e.g., drop shipper) to claim a resale exemption based on an exemption certificate provided by its customer/re-seller or any other acceptable information available to the third party vendor evidencing qualification for a resale exemption, regardless of whether the customer/re-seller is registered to collect and remit sales and use tax in the state where the sale is sourced.

(B) Each member state shall relieve sellers that follow the requirements of this section from the tax otherwise applicable if it is determined that the purchaser improperly claimed an exemption and to hold the purchaser liable for the nonpayment of tax. This relief from liability does not apply to a seller who fraudulently fails to collect the tax; to a seller who solicits purchasers to participate in the unlawful claim of an exemption; to a seller who accepts an exemption certificate when the purchaser claims an entity-based exemption when (1) the subject of the transactions sought to be covered by the exemption certificate is actually received by the purchaser at a location operated by the seller and (2) the state in which that location resides provides an exemption certificate that clearly and affirmatively indicates (graying out exemption reason types on the uniform form and posting it on a state’s web site is an indicator) that the claimed exemption is not available in that state; or to a seller who accepts an exemption certificate claiming multiple points of use for tangible personal property other than computer software for which an exemption claiming multiple points of use is acceptable under Section 44-18.1-13.

(C) Each state shall relieve a seller of the tax otherwise applicable if the seller obtains a fully completed exemption certificate or captures the relevant data elements required under the Agreement within 90 days subsequent to the sate of sale.

(1) If the seller has not obtained an exemption certificate or all relevant data elements as provided in Section 44-18.1-18, subsection (C) the seller may, within 120 days subsequent to a request for substantiation by a member state, either prove that the transaction was not subject to tax by other means or obtain a fully completed exemption certificate from the purchaser, taken in good faith. For purposes of this section, member states may continue to apply their own standards of good faith until such time as a uniform standard for good faith is defined in the Agreement.

(2) Nothing in this section shall affect the ability of member states to require purchasers to update exemption certificate information or to reapply with the state to claim certain exemptions.

(3) Notwithstanding the aforementioned, each member state shall relieve a seller of the tax otherwise applicable if it obtains a blanket exemption certificate for a purchaser with which the seller has a recurring business relationship. States may not request from the seller renewal of blanket certificates or updates of exemption certificate information or data elements when there is a recurring business relationship between the buyer and seller. For purposes of this section a recurring business relationship exists when a period of no more than twelve months elapses between sales transactions.

44-18.1-19. Uniform Tax Returns. — Each member state shall:

(A) Require that only one tax return for each taxing period for each seller be filed for the member state and all the taxing jurisdictions within the member state.

(B) Require that returns be due no sooner than the twentieth day of the month following the month in which the transaction occurred.

(C) Allow any Model 1, Model 2, or Model 3 seller to submit its sales and use tax returns in a simplified format that does not include more data fields than permitted by the governing board. A member state may require additional informational returns to be submitted not more frequently than every six months under a staggered system developed by the governing board.

(D) Allow any seller that is registered under the Agreement, which does not have a legal requirement to register in the member state, and is not a Model 1, 2, or 3 seller, to submit its sales and use tax returns as follows:

(1) Upon registration, a member state shall provide to the seller the returns required by that state.

(2) A member state may require a seller to file a return anytime within one year of the month of initial registration, and future returns may be required on an annual basis in succeeding years.

(3) In addition to the returns required in subsection (D)(2), a member state may require sellers to submit returns in the month following any month in which they have accumulated state and local tax funds for the state in the amount of one thousand dollars or more.

(E) Participate with other member states in developing a more uniform sales and use tax return that, when completed, would be available to all sellers.

(F) Require, at each member state’s discretion, all Model 1, 2, and 3 sellers to file returns electronically. It is the intent of the member states that all member states have the capability of receiving electronically filed returns.

44-18.1-20. Uniform Rules for Remittances of Funds. — Each member state shall:

(A) Require only one remittance for each return except as provided in this subsection. If any additional remittance is required, it may only be required from sellers that collect more than thirty thousand dollars in sales and use taxes in the member state during the preceding calendar year as provided herein. The state shall allow the amount of any additional remittance to be determined through a calculation method rather than actual collections. Any additional remittances shall not require the filing of an additional return.

(B) Require, at each member state’s discretion, all remittances from sellers under Models 1, 2, and 3 to be remitted electronically.

(C) Allow for electronic payments by both ACH Credit and ACH Debit.

(D) Provide an alternative method for making “same day” payments if an electronic funds transfer fails.

(E) Provide that if a due date falls on a legal banking holiday in a member state, the taxes are due to that state on the next succeeding business day.

(F) Require that any data that accompanies a remittance be formatted using uniform tax type and payment type codes approved by the governing board.

44-18.1-21. Uniform Rules for Recovery of Bad Debts. — Each member state shall use the following to provide a deduction for bad debts to a seller. To the extent a member state provides a bad debt deduction to any other party, the same procedures will apply. Each member state shall:

(A) Allow a deduction from taxable sales for bad debts. Any deduction taken that is attributed to bad debts shall not include interest.

(B) Utilize the federal definition of “bad debt” in 26 U.S.C. Sec. 166 as the basis for calculating bad debt recovery. However, the amount calculated pursuant to 26 U.S.C. Sec. 166 shall be adjusted to exclude: financing charges or interest; sales or use taxes charged on the purchase price; uncollectable amounts on property that remain in the possession of the seller until the full purchase price is paid; expenses incurred in attempting to collect any debt, and repossessed property.

(C) Allow bad debts to be deducted on the return for the period during which the bad debt is written off as uncollectable in the claimant’s books and records and is eligible to be deducted for federal income tax purposes. For purposes of this subsection, a claimant who is not required to file federal income tax returns may deduct a bad debt on a return filed for the period in which the bad debt is written off as uncollectable in the claimant’s books and records and would be eligible for a bad debt deduction for federal income tax purposes if the claimant was required to file a federal income tax return.

(D) Require that, if a deduction is taken for a bad debt and the debt is subsequently collected in whole or in part, the tax on the amount so collected must be paid and reported on the return filed for the period in which the collection is made.

(E) Provide that, when the amount of bad debt exceeds the amount of taxable sales for the period during which the bad debt is written off, a refund claim may be filed within the member state’s otherwise applicable statute of limitations for refund claims; however, the statute of limitations shall be measured from the due date of the return on which the bad debt could first be claimed.

(F) Where filing responsibilities have been assumed by a CSP, allow the service provider to claim, on behalf of the seller, any bad debt allowance provided by this section. The CSP must credit or refund the full amount of any bad debt allowance or refund received to the seller.

(G) Provide that, for the purposes of reporting a payment received on a previously claimed bad debt, any payments made on a debt or account are applied first proportionally to the taxable price of the property or service and the sales tax thereon, and secondly to interest, service charges, and any other charges.

(H) In situations where the books and records of the party claiming the bad debt allowance support an allocation of the bad debts among the member states, permit the allocation.

44-18.1-22. Confidentiality and Privacy Protections Under Model 1. — (A) The purpose of this section is to set forth the member states’ policy for the protection of the confidentiality rights of all participants in the system and of the privacy interests of consumers who deal with Model 1 sellers.

(B) As used in this section, the term “confidential taxpayer information” means all information that is protected under a member state’s laws, regulations, and privileges; the term “personally identifiable information” means information that identifies a person; and the term “anonymous data” means information that does not identify a person.

(C) The member states agree that a fundamental precept in Model 1 is to preserve the privacy of consumers by protecting their anonymity. With very limited exceptions, a CSP shall perform its tax calculation, remittance, and reporting functions without retaining the personally identifiable information of consumers.

(D) The governing board may certify a CSP only if that CSP certifies that:

(1) Its system has been designed and tested to ensure that the fundamental precept of anonymity is respected;

(2) That personally identifiable information is only used and retained to the extent necessary for the administration of Model 1 with respect to exempt purchasers;

(3) It provides consumers clear and conspicuous notice of its information practices, including what information is collects, how it collects the information, how it uses the information, how long, if at all, it retains the information and whether it discloses the information to member states. Such notice shall be satisfied by a written privacy policy statement accessible by the public on the official web site of the CSP;

(4) Its collection, use and retention of personally identifiable information will be limited to that required by the member states to ensure the validity of exemptions from taxation that are claimed by reason of a consumer’s status or the intended use of the goods or services purchased; and

(5) It provides adequate technical, physical, and administrative safeguards so as to protect personally identifiable information from unauthorized access and disclosure.

(E) Each member state shall provide public notification to consumers, including their exempt purchasers, of the state’s practices relating to the collection, use and retention of personally identifiable information.

(F) When any personally identifiable information that has been collected and retained is no longer required for the purposes set forth in subsection (D)(4), such information shall no longer be retained by the member states.

(G) When personally identifiable information regarding an individual is retained by or on behalf of a member state, such state shall provide reasonable access by such individual to his or her own information in the state’s possession and a right to correct any inaccurately recorded information.

(H) If anyone other than a member state, or a person authorized by that state’s law or the Agreement, seeks to discover personally identifiable information, the state from whom the information is sought should make a reasonable and timely effort to notify the individual of such request.

(I) This privacy policy is subject to enforcement by member states’ attorneys general or other appropriate state government authority.

(J) Each member states’ laws and regulations regarding the collection, use, and maintenance of confidential taxpayer information remain fully applicable and binding. Without limitation, the Agreement does not enlarge or limit the member states’ authority to:

(1) Conduct audits or other review as provided under the Agreement and state law.

(2) Provide records pursuant to a member state’s Freedom of Information Act, disclosure laws with governmental agencies, or other regulations.

(3) Prevent, consistent with state law, disclosures of confidential taxpayer information.

(4) Prevent, consistent with federal law, disclosures or misuse of federal return information obtained under a disclosure agreement with the Internal Revenue Service.

(5) Collect, disclose, disseminate, or otherwise use anonymous data for governmental purposes.

(K) This privacy policy does not preclude the governing board from certifying a CSP whose privacy policy is more protective of confidential taxpayer information or personally identifiable information than is required by the Agreement.

44-18.1-23. Sales Tax Holidays. — (A) If a member state allows for temporary exemption periods, commonly referred to as sales tax holidays, the member state shall:

(1) Not apply an exemption after December 31, 2003, unless the items to be exempted are specifically defined in the Agreement and the exemptions are uniformly applied to state and local sales and use taxes.

(2) Provide notice of the exemption period at least sixty days’ prior to the first day of the calendar quarter in which the exemption period will begin.

(B) A member state may establish a sales tax holiday that utilizes price thresholds set by such state and the provisions of the Agreement on the use of thresholds shall not apply to exemptions provided by a state during a sales tax holiday. In order to provide uniformity, a price threshold established by a member state for exempt items shall include only items priced below the threshold. A member state shall not exempt only a portion of the price of an individual item during a sales tax holiday.

(C) The following procedures are to be used by member states in administering a sales tax holiday exemption:

(1) Layaway sales – A sale of eligible property under a layaway sale qualifies for exemption if:

(a) final payment on a layaway order is made by, and the property is given to, the purchaser during the exemption period; or

(b) the purchaser selects the property and the retailer accepts the order for the item during the exemption period, for immediate delivery upon full payment, even if delivery is made after the exemption period.

(2) Bundled sales – Member states will follow the same procedure during the sales tax holiday as agreed upon for handling a bundled sale at other times.

(3) Coupons and discounts – A discount by the seller reduces the sales price of the property and the discounted sales price determines whether the sales price is within a sales tax holiday price threshold of a member state. A coupon that reduces the sales price is treated as a discount if the seller is not reimbursed for the coupon amount by a third-party. If a discount applies to the total amount paid by a purchaser rather than to the sales price of a particular item and the purchaser has purchased both eligible property and taxable property, the seller should allocate the discount based on the total sales price of the taxable property compared to the total sales prices of all property sold in that same transaction.

(4) Splitting of items normally sold together – Articles that are normally sold as a single unit must continue to be sold in that manner. Such articles cannot be priced separately and sold as individual items in order to obtain the exemption. For example, a pair of shoes cannot have each shoe sold separately so that the sales price of each shoe is within a sales tax holiday price threshold.

(5) Rain checks – A rain check allows a customer to purchase an item at a certain price at a later time because the particular item was out of stock. Eligible property that customers purchase during the exemption period with use of a rain check will qualify for the exemption regardless of when the rain check was issued. Issuance of a rain check during the exemption period will not qualify eligible property for the exemption if the property is actually purchased after the exemption period.

(6) Exchanges – The procedure for an exchange in regards to a sales tax holiday is as follows:

(a) If a customer purchases as item of eligible property during the exemption period, but later exchanges the item for a similar eligible item, even if a different size, different color, or other feature, no additional tax is due even if the exchange is made after the exemption period.

(b) If a customer purchase an item of eligible property during the exemption period, but after the exemption period has ended, the customer returns the item and receives credit on the purchase of a different item, the appropriate sales tax is due on the sale of the newly purchased item.

(c) If a customer purchases an item of eligible property before the exemption period, but during the exemption period the customer returns the item and receives credit on the purchase of a different item of eligible property, no sales tax is due on the sale of the new item if the new item is purchased during the exemption period.

(7) Delivery charges – Delivery charges, including shipping, handling and service charges, are part of the sales price of eligible property unless a member state defines “sales price” to exclude such charges. For the purposes of determining a sales tax holiday price threshold, if all the property in a shipment qualifies as eligible property and the sales price for each item in the shipment is within the sales tax holiday price threshold, then the seller does not have to allocate the delivery, handling, or service charge to determine if the price threshold is exceeded. The shipment will be considered a sale of eligible products. If the shipment includes eligible property and taxable property (including an eligible item with a sales price in excess of the price threshold), the seller should allocate the delivery charge by using:

(a) a percentage based on the total sales prices of the taxable property compared to the total sales prices of all property in the shipment; or

(b) a percentage based on the total weight of the taxable property compared to the total weight of all property in the shipment.

The seller must tax the percentage of the delivery charge allocated to the taxable property but does not have to tax the percentage allocated to the eligible property.

(8) Order date and back orders – For the purpose of a sales tax holiday, eligible property qualifies for exemption if:

(a) the item is both delivered to and paid for by the customer during the exemption period; or

(b) the customer orders and pays for the item and the seller accepts the order during the exemption period for immediate shipment, even if delivery is made after the exemption period. The seller accepts an order when the seller has taken action to fill the order for immediate shipment. Actions to fill an order include placement of an “in date” stamp on a mail order or assignment of an “order number” to a telephone order. An order is for immediate shipment when the customer does not request delayed shipment. An order is for immediate shipment notwithstanding that the shipment may be delayed because of a backlog of orders or because stock is currently unavailable to, or on back order by, the seller.

(9) Returns – For a 60-day period immediately after the sales tax holiday exemption period, when a customer returns an item that would qualify for the exemption, no credit for or refund of sales tax shall be given unless the customer provides a receipt or invoice that shows tax was paid, or the seller has sufficient documentation to show that tax was paid on the specific item. This 60-day period is set solely for the purpose of designating a time period during which the customer must provide documentation that shows that sales tax was paid on returned merchandise. The 60-day period is not intended to change a seller’s policy on the time period during which the seller will accept returns.

(10) Different time zones – The time zone of the seller’s location determines the authorized time period for a sales tax holiday when the purchaser is located in one time zone and a seller is located in another.

44-18.1-24. Caps and Thresholds. — (A) Each member state shall:

(1) Not have caps or thresholds on the application of state sales or use tax rates or exemptions that are based on the value of the transaction or item after December 31, 2005. A member state may continue to have caps and thresholds until that date.

(2) Not have caps that are based on the application of the rates unless the member state assumes the administrative responsibility in a manner that places no additional burden on the retailer.

(B) Each member state that has local jurisdictions that levy a sales or use tax shall not place caps or thresholds on the application of local rates or use tax rates or exemptions that are based on the value of the transaction or item after December 31, 2005. A member state may continue to have caps and thresholds until that date.

(C) The provisions of this section do not apply to sales or use taxes levied on the retail sale or transfer of motor vehicles, aircraft, watercraft, modular homes, manufactured homes, or mobile homes or to instances where the burden of administration has been shifted from the retailer.

44-18.1-25. Rounding Rule. — (A) After December 31, 2005, each member state shall adopt a rounding algorithm that meets the following criteria:

(1) Tax computation must be carried to the third decimal place, and

(2) The tax must be rounded to a whole cent using a method that rounds up to the next cent whenever the third decimal place is greater than four.

(B) Each state shall allow sellers to elect to compute the tax due on a transaction on an item or an invoice basis, and shall allow the rounding rule to be applied to the aggregated state and local taxes. No member state shall require a seller to collect tax based on a bracket system.

44-18.1-26. Customer Refund Procedures. — (A) These customer refund procedures are provided to apply when a state allows a purchaser to seek a return of over-collected sales or use taxes from the seller.

(B) Nothing in this section shall either require a state to provide, or prevent a state from providing, a procedure by which a purchaser may seek a refund directly from the state arising out of sales or use taxes collected in error by a seller from the purchaser. Nothing in this section shall operate to extend any person’s time to seek a refund of sales or use taxes collected or remitted in error.

(C) These customer refund procedures provide the first course of remedy available to purchasers seeking a return of over-collected sales or use taxes from the seller. A cause of action against the seller for the over-collected sales or use taxes does not accrue until a purchaser has provided written notice to a seller and the seller has had sixty days to respond. Such notice to the seller must contain the information necessary to determine the validity of the request.

(D) In connection with a purchaser’s request from a seller of over-collected sales or use taxes, a seller shall be presumed to have a reasonable business practice, if in the collection of such sales or use taxes, the seller: (i) uses either a provider or a system, including a proprietary system, that is certified by the state; and (ii) has remitted to the state all taxes collected less any deductions, credits, or collection allowances.

44-18.1-27. Direct Pay Permits. — Each member state shall provide for a direct pay authority that allows the holder of a direct. pay permit to purchase otherwise taxable goods and services without payment of tax to the supplier at the time of purchase. The holder of the direct pay permit will make a determination of the taxability and then report and pay the applicable tax due directly to the tax jurisdiction. Each state can set its own limits and requirements for the direct pay permit. The governing board shall advise member states when setting state direct pay limits and requirements, and shall consider use of the Model Direct Payment Permit Regulation as developed by the Task Force on EDI Audit and Legal Issues for Tax Administration.

44-18.1-28. Library of Definitions.— Each member state shall utilize common definitions as provided in this section. The terms defined are set out in the Library of Definitions, in Appendix C of the Streamlined Sales and Use Tax Agreement. A member state shall adhere to the following principles:

(A) If a term defined in the Library of Definitions appears in a member state’s sales and use tax statutes or administrative rules or regulations, the member state shall enact of adopt the Library definition of the term in its statutes or administrative rules or regulations in substantially the same language as the Library definition.

(B) A member state shall not use a Library definition in its sales or use tax statutes or administrative rules or regulations that is contrary to the meaning of the Library definition.

(C) Except as specifically provided in Section 44-18.1-16 and the Library of Definitions, a member state shall impose a sales or use tax on all products or services included within each definition or exempt from sales or use tax all products or services within each definition.

44-18.1-29. Taxability Matrix. — (A) To ensure uniform application of terms defined in the Library of Definitions each member state shall complete a taxability matrix adopted by the governing board. The member state’s entries in the matrix shall be provided and maintained in a database that is in a downloadable format approved by the governing board. A member state shall provide notice of changes in the taxability of the products or services listed in the taxability matrix as required by the governing board.

(B) A member state shall relieve sellers and CSPs from liability to the member state and its local jurisdictions for having charged and collected the incorrect amount of sales or use tax resulting from the seller or CSP relying on erroneous data provided by the member state in the taxability matrix.

44-18.1-30. Effective Date for Rate Changes. — Each member state shall provide that the effective date of rate changes for services covering a period starting before and ending after the statutory effective date shall be as follows:

(A) For a rate increase, the new rate shall apply to the first billing period starting on or after the effective date.

(B) For a rate decrease, the new rate shall apply to bills rendered on or after the effective date.

44-18.1-31. Bundled Transactions. — (A) A member state shall adopt and utilize to determine tax treatment, the core definition for a “bundled transaction”. See Section 44-18-7.1(c).

(B) 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.

(C) In the case of a bundled transaction that includes any of the following: telecommunication service, ancillary service, internet access, or audio or video programming service:

(1) 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, non-tax purposes.

(2) 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, non-tax purposes.

44-18.1-32. Seller Participation. — (A) The member states shall provide an online registration system that will allow sellers to register in all the member states.

(B) By registering, the seller agrees to collect and remit sales and use taxes for all taxable sales into the member states, including member states joining after the seller’s registration. Withdrawal or revocation of a member state shall not relieve a seller of its responsibility to remit taxes previously or subsequently collected on behalf of the state.

(C) In member states where the seller has a requirement to register prior to registering under the Agreement, the seller may be required to provide additional information to complete the registration process or the seller may choose to register directly with those states.

(D) A member state or a state that has withdrawn or been expelled shall not use registration with the central registration system and the collection of sales and use taxes in the member states as a factor in determining whether the seller has nexus with that state for any tax at any time.

44-18.1-33. Amnesty for Registration. — (A) Subject to the limitations in this section.

(1) A member state shall provide amnesty for uncollected or unpaid sales or use tax to a seller who registers to pay or to collect and remit applicable sales or use tax on sales made to purchasers in the state in accordance with the terms of the Agreement, provided that the seller was not so registered in that state in the twelve-month period preceding the effective date of the state’s participation in the Agreement

(2) The amnesty will preclude assessment for uncollected or unpaid sales or use tax together with penalty or interest for sales made during the period the seller was not registered in the state, provided registration occurs within twelve months of the effective date of the state’s participation in the Agreement.

(3) Amnesty similarly shall be provided by any additional state that joins the Agreement after the seller has registered.

(B) The amnesty is not available to a seller with respect to any matter or matters for which the seller received notice of the commencement of an audit and which audit is not yet finally resolved including any related administrative and judicial processes.

(C) The amnesty is not available for sales or use taxes already paid or remitted to the state or to taxes collected by the seller.

(D) The amnesty is fully effective, absent the seller’s fraud or intentional misrepresentation of a material fact, as long as the seller continues registration and continues payment or collection and remittance of applicable sales or use taxes for a period of at least thirty-six months. Each member state shall toll its statute of limitations applicable to asserting a tax liability during this thirty-six month period.

(E) The amnesty is applicable only to sales or use taxes due from a seller in its capacity as a seller and not to sales or use taxes due from a seller in its capacity as a buyer.

(F) A member state may allow amnesty on terms and conditions more favorable to a seller than the terms required by this section.

44-18.1.34. Method of Remittance. — When registering, the seller may select one of the following methods of remittances or other method allowed by state law to remit the taxes collected:

(A) MODEL 1, where a seller selects a CSP as an agent to perform all the seller’s sales or use tax functions, other than the seller’s obligation to remit tax on its own purchases.

(B) MODEL 2, wherein a seller selects a CAS to use which calculates the amount of tax due on a transaction.

(C) MODEL 3, wherein a seller utilizes its own proprietary automated sales tax system that has been certified as a CAS.

44-18.1-35. Registration by an Agent. — A seller may be registered by an agent. Such appointment shall be in writing and submitted to a member state if requested by the member state.

44-18.1-36. Monetary Allowance Under Model 1. — (A) Each member state shall provide a monetary allowance to a CSP in Model 1 in accordance with the terms of the contract between the governing board and the CSP. The details of the monetary allowance will be provided through the contract process. The governing board shall require that such allowance be funded entirely from money collected in Model 1.

(B) The contract between the governing board and a CSP may base the monetary allowance to a CSP on one or more of the following:

(1) A base rate that applies to taxable transactions processed by the CSP.

(2) For a period not to exceed twenty-four months following a voluntary seller’s registration through the Agreement’s central registration process, a percentage of tax revenue generated for a member state by the voluntary seller for each member state for which the seller does not have a requirement to register to collect the tax.

44-18.1-37. Monetary Allowance for Model 2 Sellers. — The member states initially anticipate that they will provide a monetary allowance to sellers under Model 2 based on the following:

(A) All sellers shall receive a base rate for a period not to exceed twenty-four months following the commencement of participation by a seller. The base rate will be set after the base rate has been established for Model 1. This allowance will be in addition to any discount afforded by each member state at the time.

(B) The member states anticipate a monetary allowance to a Model 2 Seller based on the following:

(1) For a period not to exceed twenty-four months following a voluntary seller’s registration through the Agreement’s central registration process, a percentage of tax revenue generated for a member state by the voluntary seller for each member state for which the seller does not have a requirement to register to collect the tax.

(2) Following the conclusion of the twenty-four month period, a seller will only be entitled to a vendor discount afforded under each member state’s law at the time the base rate expires.

44-18.1-38. Monetary Allowance for Model 3 Sellers and All Other Sellers. — The member states anticipate that they will provide a monetary allowance to sellers under Model 3 and to all other sellers that are not under Models 1 or 2 based on the following:

(A) For a period not to exceed twenty-four months following a voluntary seller’s registration through the Agreement’s central registration process, a percentage of tax revenue generated for a member state by the voluntary seller for each member state for which the seller does not have a requirement to register to collect the tax.

(B) Vendor discounts afforded under each member state’s law.

SECTION 13. Section 44-59-10 of the General Laws in Chapter 44-59 entitled "Uniform Sales And Use Tax Administration Act" is hereby amended to read as follows:

44-59-10. Sunset provision. -- This chapter shall be repealed on June 30, 20067, without further action by the general assembly, if the statutory amendments to the sales and use tax law necessary to bring this state into compliance with the Streamlined Sales and Use Tax Agreement are not enacted by the general assembly by June 30, 2006 January 1, 2007.

SECTION 14. RESOLVED, That a special legislative commission be and the same is hereby created consisting of eight (8) members two (2) of whom shall be from the house of representatives, not more than one from the same political party to be appointed by the speaker; two (2) of whom shall be from the senate, not more than one from the same political party to be appointed by the president; one of whom shall be the chairman of the house finance committee, or designee; one of whom shall be the chairman of the senate finance committee, or designee; and one of whom shall be the state tax administrator, or designee, and one of whom shall be the chief of the office of revenue analysis or designee.

The purpose of said commission shall be to study all aspects of the state sales tax and shall include, but not be limited to: (1) evaluating the business and economic impact of an adjustment to the sales tax rate; (2) a determination of what rate will make the state of Rhode Island the most competitive in the region; (3) an analysis of streamlining sales tax agreements among the states; (4) a determination whether the sales tax shall be expanded into goods or services not covered by existing law; and (5) evaluating whether a reduction in the tax rates consistent with a rate reduction beginning January 1, 2008 of one quarter percent (.25%) per year continuing to January 1, 2014 until such time as the tax rate shall be five percent (5%) is economically feasible for the state of Rhode Island.

Forthwith upon passage of this resolution, the members of the commission shall meet at the call of the speaker of the house and president of the senate. The chairpersons of the house and senate finance committees shall act as co-chairpersons. Vacancies in said commission shall be filled in like manner as the original appointment.

The membership of said commission shall receive no compensation for their services.

All departments and agencies of the state shall furnish such advice and information, documentary and otherwise, to said commission and its agent as is deemed necessary or desirable by the commission to facilitate the purposes of this resolution.

The speaker of the house is hereby authorized and directed to provide suitable quarters for said commission; and be it further

RESOLVED, That the commission shall report its findings and recommendations to the general assembly on or before June 30, 2007 and said commission shall expire on August 31, 2007.

SECTION 15. Section 44-20-13.2 of the General Laws in Chapter 44-20 entitled "Cigarette Tax" is hereby amended to read as follows:

44-20-13.2. Tax imposed on smokeless tobacco, cigars, and pipe tobacco products. – (a) A tax is imposed on all smokeless tobacco, cigars, and pipe tobacco products sold or held for sale in the state by any person, the payment of the tax to be accomplished according to a mechanism established by the administrator, division of taxation, department of administration. Any tobacco product on which the proper amount of tax provided for in this chapter has been paid, payment being evidenced by a stamp, is not subject to a further tax under this chapter. The tax imposed by this section is at the rate of forty percent (40%) of the wholesale cost of smokeless tobacco, cigars, and pipe tobacco products. The proceeds collected are paid into the general fund.

(b) Notwithstanding the forty percent (40%) rate in subsection (a) above, in the case of cigars, the tax shall not exceed fifty cents ($.50) for each cigar for the period July 1, 2006 through June 30, 2008.

SECTION 16. Sections 44-20-1 and 44-20-13.2 of the General Laws in Chapter 44-20 entitled "Cigarette Tax" are hereby amended to read as follows:

44-20-1. Definitions. -- Whenever used in this chapter, unless the context requires otherwise:

(1) "Administrator" means the tax administrator;

(2) "Cigarettes" means and includes any cigarettes suitable for smoking in cigarette form, and each sheet of cigarette rolling paper;

(3) "Dealer" means any person other than a distributor who is engaged in this state in the business of selling cigarettes;

(4) (i) "Distributor" means any person:

(A) Engaged in this state in the business of manufacturing cigarettes or any person engaged in the business of selling cigarettes to dealers, or to other persons, for the purpose of resale only; provided, that seventy-five percent (75%) of all cigarettes sold by that person in this state are sold to dealers or other persons for resale;

(B) Selling cigarettes directly to consumers at retail, and maintaining one or more regular places of business in this state for that purpose; provided, that seventy-five percent (75%) of the sold cigarettes are purchased directly from the manufacturer; or

(C) Selling cigarettes directly to consumers in this state by means of at least twenty-five (25) cigarette vending machines;

(ii) Provided, that any person who owns or maintains five (5) or more retail outlets in Rhode Island, having one hundred percent (100%) common ownership, through which cigarettes are sold at retail may apply for a distributor's license, and upon issuance of the license, that person is deemed to be a distributor under this chapter;

(5) "Licensed dealer" means a dealer licensed under the provisions of this chapter;

(6) "Licensed distributor" means a distributor licensed under the provisions of this chapter;

(7) "Person" means any individual, firm, fiduciary, partnership, corporation, trust, or association, however formed;

(8) "Place of business" means and includes any place where cigarettes are sold or where cigarettes are stored or kept for the purpose of sale or consumption, including any vessel, vehicle, airplane, train, or vending machine;

(9) "Sale" or "sell" includes and applies to gifts, exchanges, and barter;

(10) "Snuff" means any finely cut, ground, or powdered tobacco that is not intended to be smoked;

(10) (11) "Stamp" means the impression, device, stamp, label, or print manufactured, printed, or made as prescribed by the administrator to be affixed to packages of cigarettes, as evidence of the payment of the tax provided by this chapter; and also includes impressions made by metering machines authorized to be used under the provisions of this chapter.

44-20-13.2. Tax imposed on smokeless tobacco, cigars, and pipe tobacco products. -- A tax is imposed on all smokeless tobacco, cigars, and pipe tobacco products sold or held for sale in the state by any person, the payment of the tax to be accomplished according to a mechanism established by the administrator, division of taxation, department of administration. Any tobacco product on which the proper amount of tax provided for in this chapter has been paid, payment being evidenced by a stamp, is not subject to a further tax under this chapter. The tax imposed by this section shall be as follows: is at

(a) At the rate of forty percent (40%) of the wholesale cost of smokeless tobacco, cigars, and pipe tobacco products, and smokeless tobacco other than snuff.

(b) At the rate of one dollar ($1.00) per ounce of snuff, and a proportionate tax at the like rate on all fractional parts of an ounce thereof. Such tax shall be computed based on the net weight as listed by the manufacturer, provided, however, that any product listed by the manufacturer as having a net weight of less than 1.2 ounces shall be taxed as if the product has a net weight of 1.2 ounces.

The proceeds collected are paid into the general fund.

SECTION 17. Section 42-64-20 of the General Laws in Chapter 42-64 entitled "Rhode Island Economic Development Corporation" is hereby amended to read as follows:

42-64-20. Exemption from taxation. -- (a) The exercise of the powers granted by this chapter will be in all respects for the benefit of the people of this state, the increase of their commerce, welfare, and prosperity and for the improvement of their health and living conditions and will constitute the performance of an essential governmental function and the corporation shall not be required to pay any taxes or assessments upon or in respect of any project or of any property or moneys of the corporation, levied by any municipality or political subdivision of the state; provided, that the corporation shall make payments in lieu of real property taxes and assessments to municipalities and political subdivisions with respect to projects of the corporation located in the municipalities and political subdivisions during those times that the corporation derives revenue from the lease or operation of the projects. Payments in lieu of taxes shall be in amounts agreed upon by the corporation and the affected municipalities and political subdivisions. Failing the agreement, the amounts of payments in lieu of taxes shall be determined by the corporation using a formula that shall reasonably ensure that the amounts approximate the average amount of real property taxes due throughout the state with respect to facilities of a similar nature and size. Any municipality or political subdivision is empowered to accept at its option an amount of payments in lieu of taxes less than that determined by the corporation. If, pursuant to section 42-64-13(f), the corporation shall have agreed with a municipality or political subdivision that it shall not provide all of the specified services, the payments in lieu of taxes shall be reduced by the cost incurred by the corporation or any other person in providing the services not provided by the municipality or political subdivision.

(b) The corporation shall not be required to pay state taxes of any kind, and the corporation, its projects, property, and moneys and, except for estate, inheritance, and gift taxes, any bonds or notes issued under the provisions of this chapter and the income (including gain from sale or exchange) from these shall at all times be free from taxation of every kind by the state and by the municipalities and all political subdivisions of the state. The corporation shall not be required to pay any transfer tax of any kind on account of instruments recorded by it or on its behalf.

(c) For purposes of the exemption from taxes and assessments upon or in respect of any project under subsections (a) or (b) of this section, the corporation shall not be required to hold legal title to any real or personal property, including any fixtures, furnishings or equipment which are acquired and used in the construction and development of the project, but the legal title may be held in the name of a lessee (including sublessees) from the corporation. This property, which shall not include any goods or inventory used in the project after completion of construction, shall be exempt from taxation to the same extent as if legal title of the property were in the name of the corporation; provided that the board of directors of the corporation adopts a resolution confirming use of the tax exemption for the project by the lessee. No resolution shall be adopted without the prior approval of the general assembly. The resolution shall include findings that: (1) the project is a project of the corporation under section 42-64-3(20), and (2) it is in the interest of the corporation and of the project that legal title be held by the lessee from the corporation. In adopting the resolution, the board of directors may consider any factors it deems relevant to the interests of the corporation or the project including, for example, but without limitation, reduction in potential liability or costs to the corporation or designation of the project as a "Project of Critical Economic Concern" pursuant to Chapter 117 of this title.

SECTION 18. Chapter 42-64 of the General Laws entitled "Rhode Island Economic Development Corporation" is hereby amended by adding thereto the following section:

42-64-20.1. Procedure. – (a) A resolution by the board of directors of the corporation that adopts confirming use of the tax exemption for a project by the lessee as required in section 42-64-20(c) shall be deemed to have been approved by the general assembly when the general assembly passes a concurrent resolution of approval which the corporation requests that, the resolution adopting confirming use of the tax exemption for a project by the lessee, be approved by the general assembly. These requests shall be transmitted to the speaker of the house and the president of the senate with copies to the chairpersons of the respective finance committees, and fiscal advisors. The request for approval shall include:

(1) A full description of the project to which the tax exemption is related;

(2) The corporation's findings required by section 42-62-10(1); and

(3) The corporation's analysis of impact required by section 42-64-10(2).

SECTION 19 Section 45-37.1-9 of the General Laws in Chapter 45-37.1 entitled "Industrial Facilities Corporation" is hereby amended to read as follows:

45-37.1-9. Exemption from taxation. -- (a) The exercise of the powers granted by this chapter will be in all respects for the benefit of the people of this state, for the increase of their commerce, welfare and prosperity, and for the improvement of their health and living conditions, and will constitute the performance of an essential government function, and the corporation is not required to pay any taxes or assessments upon or in respect of a project, or any property or moneys of the corporation, levied by any municipality or political subdivision of the state, nor is the corporation required to pay state taxes of any kind, and the corporation, its projects, property, and moneys, and any bonds and notes issued under the provisions of this chapter, their transfer and the income from them, including any profit made on their sale, are at all times free from taxation of every kind by the state and by the municipalities and all other political subdivisions of the state, and the corporation is not required to pay any transfer tax of any kind on account of instruments recorded by or on its behalf or in connection with the financing of any of its projects; provided, that any person, partnership, corporation, or concern leasing a project from the corporation shall pay to the city, town, school district, or other political subdivision or special district having taxing powers, in which the project is located, a payment in lieu of taxes which equals the taxes on real and personal property which the lessee would have been required to pay, had it been the owner of the property during the period for which the payment is made, and under no circumstances are the corporation or its projects, properties, money, bonds, or notes obligated, liable, or subject to a lien of any kind for their enforcement, collection, or payment; and provided, further, that in the case of any person, partnership, corporation, or concern leasing a project from the corporation any such person, partnership, corporation or concern so leased shall be exempt from payment of state sales tax applicable to materials used in construction of such a facility only to the extent that the costs of such materials do not exceed the amount financed through the corporation and the exemption has the prior approval of the general assembly.

(b) If and to the extent the proceedings under which the bonds or notes authorized to be issued under the provisions of this chapter so provide, the corporation may agree to cooperate with the lessee of a project in connection with any administrative or judicial proceedings for determining the validity or amount of payments, and may agree to appoint or designate and reserve the right in and for the lessee to take all action which the corporation may lawfully take in respect of those payments and all matters relating to them, provided, that the lessee bears and pay all costs and expenses of the corporation thereby incurred at the request of the lessee or by reason of any action taken by the lessee in behalf of the corporation. Any lessee of a project, which has paid the amounts in lieu of taxes required by the first sentence of this section, is not required to pay any taxes for which a payment in lieu thereof has been made to the state or to any city, town, school district, or other political subdivision or special district having taxing powers, notwithstanding any other statute to the contrary.

SECTION 20. Chapter 45-37.1 of the General Laws entitled "Industrial Facilities Corporation" is hereby amended by adding thereto the following section:

45-37.1-9.1. Procedure. – (a) An exemption from payment of state sales tax applicable to materials used in construction of a facility only to the extent that the costs of such materials do not exceed the amount financed through the corporation as required in section 45-37.1-9 shall be deemed to have been approved by the general assembly when the general assembly passes a concurrent resolution of approval which the corporation requests, that the exemption from payment of state sales tax applicable to materials used in construction of a facility only to the extent that the costs of such materials do not exceed the amount financed through the corporation, be approved by the general assembly. These requests shall be transmitted to the speaker of the house and the president of the senate with copies to the chairpersons of the respective finance committees and fiscal advisors. The request for approval shall include:

(1) A full description of the project to which the tax exemption is related; and

(2) The corporation's analysis of the impact of the proposed project will or may have on the state. The analysis shall be supported by such appropriate data and documentation and shall consider, but not be limited to, the following factors:

(i) The impact on the industry or industries in which the completed project will be involved;

(ii) State fiscal matters, including the state budget (revenues and expenses);

(iii) The financial exposure of the taxpayers of the state under the plans for the proposed project and negative foreseeable contingencies that may arise therefrom;

(iv) The approximate number of jobs projected to be created, construction and nonconsturction;

(v) Identification of geographic sources of the staffing for identified jobs;

(vi) The projected duration of the identified construction jobs;

(vii) The approximate wage rates for the identified jobs;

(viii) The types of fringe benefits to be provided with the identified jobs, including healthcare insurance and any retirement benefits;

(ix) The projected fiscal impact on increased personal income taxes to the state of Rhode Island; and

(x) The description of any plan or process intended to stimulate hiring from the host community, training of employees or potential employees and outreach to minority job applicants and minority businesses.

SECTION 21. Section 4 of this article shall take effect on June 30, 2005. Sections 9, 10, 11 and 12 shall take effect on January 1, 2007. Section 15 shall take effect upon passage and shall be effective from July 1, 2006 through June 30, 2008. Section 16 shall take effect on July 1, 2006. The remainder of this article shall take effect upon passage.