Title: S.L. 2002-16
Subject: Session Law 2002-16
Category: Introduced Bill 2002

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2001

SESSION LAW 2002-16
HOUSE BILL 1521

AN ACT to conform sourcing of mobile telecommunications services tO the federal mobile telecommunications sourcing act and to codify the sourcing principles for other telecommunications services.

The General Assembly of North Carolina enacts:

SECTION 1.  G.S. 105‑164.3 is amended by adding a new subdivision to read:
"§ 105‑164.3.  Definitions.
The following definitions apply in this Article:
…
(26a)	Place of primary use. – The street address representative of where the use of a customer's telecommunications service primarily occurs. The street address must be the customer's residential street address or primary business street address. For mobile telecommunications service, the street address must be within the licensed service area of the service provider. If the customer who contracted with the telecommunications provider for the telecommunications service is not the end user of the service, the end user is considered the customer for the purpose of determining the place of primary use."
SECTION 2.  G.S. 105‑164.3(27) reads as rewritten:
"(27)	Prepaid telephone calling Service. – A right that meets all of the following requirements:
a.	Authorizes the exclusive purchase of telecommunications service.
b.	Must be paid for in advance.
c.	Enables the origination of calls by means of an access number, authorization code, or another similar means, regardless of whether the access number or authorization code is manually or electronically dialed.
d.	Is sold in units or dollars whose number or dollar value declines with use and is known on a continuous basis."
SECTION 3.  G.S. 105‑164.3(39) is repealed.
SECTION 4.  G.S. 105‑164.4(a)(4d) reads as rewritten:
"(4d)	The sale or recharge of prepaid telephone calling service is taxable at the general rate of tax. The tax applies regardless of whether tangible personal property, such as a card or a telephone, is transferred. Prepaid telephone calling service is taxable at the point of sale instead of at the point of use and is sourced in accordance with G.S. 105-164.4B. Prepaid telephone calling service taxed under this subdivision is not subject to tax as a telecommunications service.
		"
SECTION 5.  G.S. 105‑164.4B(a)(3) reads as rewritten:
"(a)	Principles. – The following principles apply in determining where to source the sale of a product. These principles apply regardless of the nature of the product.
…
(3)	Delivery address unknown. – When a seller of a product does not know the address where a product is received, the sale is sourced to the first address or location listed in this subdivision that is known to the seller:
a.	The business or home address of the purchaser.
b.	The billing address of the purchaser or, if the product is a prepaid telephone calling service that authorizes the purchase of mobile telecommunications service, the location associated with the mobile telephone number.
c.	The address of the seller."
SECTION 6.  G.S. 105‑164.4C(a) reads as rewritten:
"(a)	General. – The gross receipts derived from providing telecommunications service in this State are taxed at the rate set in G.S. 105‑164.4(a)(4c). Telecommunications service is provided in this State if the service is sourced to this State under the sourcing principles set out in subsections (a1) and (a2) of this section. The definitions and provisions of the federal Mobile Telecommunications Sourcing Act apply to the sourcing and taxation of mobile telecommunications services."
SECTION 7.  G.S. 105‑164.4C(b)(1) reads as rewritten:
"(b)	Included in Gross Receipts. – Gross receipts derived from telecommunications service include the following:
(1)	Receipts from flat rate service, service provided on a call-by-call basis, mobile telecommunications service, and private telecommunications service.
…"
SECTION 8.  G.S. 105‑164.4C(c)(2) reads as rewritten:
"(c)	Excluded From Gross Receipts. – Gross receipts derived from telecommunications service do not include any of the following:
…
(2)	Telecommunications services that are resold as part of a prepaid telephone calling service.
…"
SECTION 9.  G.S. 105‑164.4C is amended by adding two new subsections to read:
"(a1)	General Sourcing Principles. – The following general sourcing principles apply to telecommunications services. If a service falls within one of the exceptions set out in subsection (a2) of this section, the service is sourced in accordance with the exception instead of the general principle.
(1)	Flat rate. – A telecommunications service that is not sold on a call-by-call basis is sourced to this State if the place of primary use is in this State.
(2)	General call-by-call. – A telecommunications service that is sold on a call-by-call basis and is not a postpaid calling service is sourced to this State in the following circumstances:
a.	The call both originates and terminates in this State.
b.	The call either originates or terminates in this State and the telecommunications equipment from which the call originates or terminates and to which the call is charged is located in this State. This applies regardless of where the call is billed or paid. 
(3)	Postpaid. – A postpaid calling service is sourced in accordance with either of the following principles, at the election of the seller:
a.	The principle set out in subdivision (a1)(2) of this section for call-by-call service.
b.	The origination point of the telecommunications signal as first identified by either the seller's telecommunications system or, if the system used to transport the signal is not the seller's system, by information the seller receives from its service provider.
(a2)	Sourcing Exceptions. – The following telecommunications services and products are sourced in accordance with the principles set out in this subsection:
(1)	Mobile. – Mobile telecommunications service is sourced to the place of primary use, unless the service is authorized by a prepaid telephone calling service or is air-to-ground radiotelephone service. Air-to-ground radiotelephone service is a postpaid calling service that is offered by an aircraft common carrier to passengers on its aircraft and enables a telephone call to be made from the aircraft. The sourcing principle in this subdivision applies to a service provided as an adjunct to mobile telecommunications service if the charge for the service is included within the term 'charges for mobile telecommunications services' under the federal Mobile Telecommunications Sourcing Act.
(2)	Prepaid. – Prepaid telephone calling service is sourced in accordance with G.S. 105-164.4B.
(3)	Private. – Private telecommunications service is sourced in accordance with subsection (e) of this section."
SECTION 10.  G.S. 105‑164.4C(e) reads as rewritten:
"(e)	Private Line. – The gross receipts derived from private telecommunications service are sourced as follows:
(1)	If all the customer's channel termination points are located in this State, the service is sourced to this State.
(2)	If all the customer's channel termination points are not located in this State and the service is billed on the basis of channel termination points, the charge for each channel termination point located in this State is sourced to this State.
(3)	 If all the customer's channel termination points are not located in this State and the service is billed on the basis of channel mileage, the following applies:a.	A charge for a channel segment between two channel termination points located in this State is sourced to this State.
b.	Fifty percent (50%) of a charge for a channel segment between a channel termination point located in this State and a channel termination point located in another state is sourced to this State.
(4)	If all the customer's channel termination points are not located in this State and the service is not billed on the basis of channel termination points or channel mileage, a percentage of the charge for the service is sourced to this State. The percentage is determined by dividing the number of channel termination points in this State by the total number of channel termination points."
SECTION 11. G.S. 105‑164.4C(h) reads as rewritten:
"(h)	Definitions. – The following definitions apply in this section:
											
(1)	Call-by-call basis. – A method of charging for a telecommunications service whereby the price of the service is measured by individual calls.
(2)	Call center. – Defined in G.S. 105‑164.27A.
(3)	Mobile telecommunications service. – Defined in G.S. 105‑164.3.
(4)	Place of primary use. – Defined in G.S. 105-164.3.
(5)	Postpaid calling service. – A telecommunications service that is charged on a call-by-call basis and is obtained by making payment at the time of the call either through the use of a credit or payment mechanism, such as a bank card, travel card, credit card, or debit card, or by charging the call to a telephone number that is not associated with the origination or termination of the telecommunications service. A postpaid calling service includes a service that meets all the requirements of a prepaid telephone calling service, except the exclusive use requirement.
(6)	Prepaid telephone calling service. – Defined in G.S. 105-164.3.
(7)	Private telecommunications service. – Telecommunications service that entitles a subscriber of the service to exclusive or priority use of a communications channel or group of channels.
(8)	Telecommunications service. – Defined in G.S. 105‑164.3."
SECTION 12.  G.S. 105‑467(b)(6) reads as rewritten:
"(6)	The sales price of prepaid telephone calling service taxed as tangible personal property under G.S. 105‑164.4(a)(4d)."
SECTION 13.  Subdivision (6) of the first paragraph of Section 4 of Chapter 1096 of the 1967 Session Laws reads as rewritten:
"(6)	The sales price of prepaid telephone calling service taxed as tangible personal property under G.S. 105‑164.4(a)(4d)."
SECTION 14.  G.S. 105‑164.4C(a1)(3), as enacted by this act, reads as rewritten:
"(3)	Postpaid. – A postpaid calling service is sourced 		
to the origination point of the telecommunications signal as first identified by either the seller's telecommunications system or, if the system used to transport the signal is not the seller's system, by information the seller receives from its service provider."
SECTION 15.  G.S. 62A‑21(4) reads as rewritten:
"(4)	"CMRS connection" means each mobile handset telephone number assigned to a CMRS customer with a place of primary use in North Carolina."
SECTION 16.  G.S. 105‑164.4C(e)(4), as enacted by Section 10 of this act, and Section 14 of this act become effective January 1, 2004, and apply to taxable services reflected on bills dated on or after January 1, 2004.  The remainder of this act becomes effective August 1, 2002, and applies to taxable services reflected on bills dated after August 1, 2002.
In the General Assembly read three times and ratified this the 3^rd day of July, 2002.

	s/	 Beverly E. Perdue
	 President of the Senate

	s/	 James B. Black
	 Speaker of the House of Representatives

	s/	 Michael F. Easley
	 Governor

Approved 3:30 p.m. this 11^th day of July, 2002

Page 	Session Law 2002-16	House Bill 1521

House Bill 1521	Session Law 2002-16	Page