# Title 57 — Taxation

## Chapter 57-39.4 — Streamlined Sales and Use Tax Agreement

### § 57-39.4-01. Adoption of streamlined sales and use tax agreement.

North Dakota adopts the streamlined sales and use tax agreement as adopted
November 12, 2002, and as may be amended by the member states of the streamlined sales
tax project. The entire agreement is adopted by reference with the exception of articles III and V,
which are adopted as set out in this chapter.
### § 57-39.4-02. (301) State level administration.

1. Each member state shall provide state level administration of sales and use taxes
subject to the agreement. 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 and purchasers are only required to register with, file
returns with, and remit funds to the state level authority. The state level authority of a
member state shall provide for collection of any local taxes and distribution of them to
the appropriate taxing jurisdictions. The state level authority shall conduct, or others
may be authorized to conduct on its behalf, subject to the provisions of subsection 2,
all audits of the sellers and purchasers for that state's tax and the tax of its local
jurisdictions. Except as provided in this chapter local jurisdictions shall not conduct
independent sales or use tax audits of sellers and purchasers.
2. If authorized by statute, nothing in this section prohibits the state level authority from
authorizing audits of taxpayers to be conducted or performed by others on behalf of
the state level authority provided:
a. The person is conducting the audit for all taxes due and not only for taxes due to
a specific local taxing jurisdiction;
b. The person is subject to the same confidentiality provisions and other protections
afforded to a taxpayer as a person working for the state level authority;
c. Absent fraud, a refund claim filed subsequent to the audit that covers part of the
audit period or mutual consent, the audit does not cover an audit period already
conducted by the state level authority or another person acting on its behalf; and
d. The audit is subject to the same administrative and appeal procedures granted to
audits conducted by the state level authority.
### § 57-39.4-03. (302) State and local tax bases.

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 fuel used
to power motor vehicles, aircraft, locomotives, or watercraft, or to electricity, piped natural or
artificial gas, or other fuels delivered by the seller and the retail sale or transfer of motor
vehicles, aircraft, watercraft, modular homes, manufactured homes, or mobile homes.
### § 57-39.4-04. (303) 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:
1. A seller registering under the agreement may register in one or more of the states
utilizing the central registration system provided in article IV of the agreement.
2. A certified service provider may require a seller registering under the agreement to
register in all of the full-member states as a condition of receiving certified service
provider services.
3. The member states agree not to require the payment of any registration fees or other
charges for a seller registering through the central registration system in a state in
which the seller has no legal requirement to register.
4. A written signature from the seller is not required.
5. An agent may register a seller under uniform procedures adopted by the member
states.

6. 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.
7. Nothing in this section shall be construed to relieve a seller of any legal obligation it
may have under a state's laws to register in that state or its obligation to collect and
remit taxes for at least thirty-six months in a state and meet all other requirements for
amnesty set out in section 402 of the agreement in order to be eligible for amnesty in
the state.
8. Whenever a state joins the agreement, sellers already registered under the agreement
shall be notified by the governing board and the sellers may elect to also be registered
in the new state.
9. The governing board shall make information available regarding the requirements and
options for filing a simplified electronic return and for filing remittances in any member
state. A member state may provide information to sellers concerning other tax return
filing options in that state.
10. The governing board shall cause the system for registering under the agreement to
include a feature that allows sellers registered under the agreement to update relevant
registration data in the system and have such updated data provided to all affected
states utilizing the system. The governing board shall establish conditions and
procedures to allow states which are not members of the agreement to participate in
the registration system.
### § 57-39.4-05. (304) Notice for state tax changes.

1. 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:
a. Provide sellers with as much advance notice as practicable of a rate change.
b. Limit the effective date of a rate change to the first day of a calendar quarter.
c. Notify sellers of legislative changes in the tax base and amendments to sales and
use tax rules and regulations.
2. 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.
3. Each member state failing to provide for at least thirty days between the enactment of
the statute providing for a rate change and the effective date of such rate change shall
relieve the seller of liability for failing to collect tax at the new effective rate if:
a. The seller collected tax at the immediately preceding effective rate; and
b. The seller's failure to collect at the newly effective rate does not extend beyond
thirty days after the date of enactment of the new rate.
4. Notwithstanding subsection 3, if the member state establishes that the seller
fraudulently failed to collect at the new rate or solicits purchasers based on the
immediately preceding effective rate, this relief does not apply.
5. Member states may provide for relief of liability for failing to collect tax as a result of a
tax change beyond the liability relief required by subsection 3.
### § 57-39.4-06. (305) Local rate and boundary changes.

Each member state that has local jurisdictions that levy a sales or use tax shall:
1. 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.
2. 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.
3. 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.

4. Provide and maintain a database that describes boundary changes for all taxing
jurisdictions. This database shall include a description of the change and the effective
date of the change for sales and use tax purposes.
5. 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 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.
6. Provide and maintain a database that assigns the proper tax rates and jurisdictions to
each five-digit and nine-digit zip code within a member state. 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 certified service provider is unable to
determine the nine-digit zip code designation applicable to a transaction after
exercising due diligence to determine the designation, the seller or certified service
provider 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 certified service provider has
exercised due diligence if the seller has attempted to determine the tax rate and
jurisdiction by using software approved by the governing board that makes this
assignment from the address and zip code information applicable to the transaction.
7. 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 6. The database records must be in the same approved
format as the database records under subsection 6 and must meet the requirements
developed pursuant to the federal Mobile Telecommunications Sourcing Act [4 U.S.C.
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 certified service provider may use those
database records in place of the five-digit and nine-digit zip code database records
provided for in subsection 6. If a seller or certified service provider is unable to
determine the applicable rate and jurisdiction using an address-based database record
after exercising due diligence, the seller or certified service provider may apply the
nine-digit zip code designation applicable to a transaction. If a nine-digit zip code
designation is not available for a street address or if a seller or certified service
provider is unable to determine the nine-digit zip code designation applicable to a
transaction after exercising due diligence to determine the designation, the seller or
certified service provider 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 certified
service provider has exercised due diligence if the seller or certified service provider
has attempted to determine the tax rate and jurisdiction by using software approved by
the governing board that makes this assignment from the address and zip code
information applicable to the transaction.
8. States which have met the requirements of subsection 6 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 under
subsection 7 and must meet the requirements developed under the federal Mobile
Telecommunications Sourcing Act [4 U.S.C. 119(a)]. If a state certifies a
vendor-provided address-based database, a seller or certified service provider may
use that database in place of the database provided for in subsection 6 or 7. 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.
9. Make databases provided under subsections 5, 6, 7, and 8 available to a seller, or
certified service provider by the first day of the month prior to the first day of a calendar

quarter. Databases must be in a format approved by the governing board and
available on each state's website or other location determined by the governing board.
### § 57-39.4-07. (306) Relief from certain liability.

Each member state shall relieve sellers and certified service providers using databases
under subsections 6, 7, and 8 of section 57-39.4-06 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 certified service provider 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 under subsection 7 or 8 of section 57-39.4-06 may
cease providing liability relief for errors resulting from the reliance on the database provided by
the member state under subsection 6 of section 57-39.4-06. 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.
### § 57-39.4-08. (307) Database requirements and exceptions.

1. The electronic databases provided for in subsections 4, 5, 6, and 7 of
section 57-39.4-06 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 sections 57-39.4-06 and
of the database.
2. The provisions of subsections 6 and 7 of section 57-39.4-06 do not apply when the
purchased product is received by the purchaser at the business location of the seller.
3. The databases provided by subsections 4, 5, 6, and 7 of section 57-39.4-06 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 under this agreement or a certified
service provider shall not be required to collect sales or use taxes for the state until the
first day of the calendar quarter commencing more than sixty days after the state has
provided the databases required by subsections 4, 5, and 6 of section 57-39.4-06.
Provided, for the initial implementation of the agreement, a certified service provider
shall be required to collect sales and use taxes for each member state, subject to the
provisions of the agreement, under the terms of the operating agreement entered into
between the certified service provider and the governing board in order to provide
adequate time for testing and loading of the databases.
### § 57-39.4-09. (308) State and local tax rates.

1. No member state shall have multiple state sales and use tax rates on items of
personal property or services, 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 under the agreement. In addition, if federal law prohibits the imposition of
local tax on a product that is subject to state tax, the state may impose an additional
rate on the product, provided the rate achieves tax parity for similar products.
2. 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.
3. The provisions of this section do not apply to sales or use taxes levied on fuel used to
power motor vehicles, aircraft, locomotives, or watercraft, or to electricity, piped natural
or artificial gas or other fuels delivered by the seller, or the retail sale or transfer of
motor vehicles, aircraft, watercraft, modular homes, manufactured homes, or mobile
homes.

### § 57-39.4-10. (309) Application of general sourcing rules and exclusions from the rules.

1. Each member state shall agree to require sellers to source the retail sale of a product
in accordance with section 57-39.4-11 or 57-39.4-11.1. Except as provided in section
57-39.4-11.1, the provisions of section 57-39.4-11 apply to all sales regardless of the
characterization of a product as tangible personal property, a digital good, or a service.
Except as otherwise provided in the agreement, the provisions of sections 57-39.4-11
and 57-39.4-11.1 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.
2. Sections 57-39.4-11 and 57-39.4-11.1 do not apply to sales or use taxes levied on the
following:
a. 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.
b. The retail sale, excluding lease or rental, of motor vehicles, trailers, semitrailers,
or aircraft that do not qualify as transportation equipment, as defined in
subsection 4 of section 57-39.4-11. 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 subsection 3 of section 57-39.4-11.
c. Telecommunications services and ancillary services, as set out in
section 57-39.4-16, and internet access service shall be sourced in accordance
with section 57-39.4-15.
d. Florist sales as defined by each member state. These sales must be sourced
according to the requirements of each member state.
e. The retail sale of products and services qualifying as direct mail must be sourced
in accordance with section 57-39.4-14.
### § 57-39.4-11. (310) General sourcing rules.

1. Except as provided in section 57-39.4-11.1, a retail sale, excluding lease or rental, of a
product shall be sourced as follows:
a. When the product is received by the purchaser at a business location of the
seller, the sale is sourced to that business location.
b. 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.
c. When subdivisions a and b 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.
d. When subdivisions a, b, and c 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.
e. When none of the previous rules of subdivisions a, b, c, and d 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.
2. The lease or rental of tangible personal property, other than property identified in
subsection 3 or 4, shall be sourced as follows:

a. 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 1. 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.
b. 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 1.
c. 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.
3. The lease or rental of motor vehicles, trailers, semitrailers, or aircraft that do not qualify
as transportation equipment, as defined in subsection 4, shall be sourced as follows:
a. For a lease or rental that requires recurring periodic payments, each periodic
payment is sourced to the primary property location. 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. This
location shall not be altered by intermittent use at different locations.
b. 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 1.
c. 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.
4. 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 1,
notwithstanding the exclusion of lease or rental in subsection 1. "Transportation
equipment" means any of the following:
a. Locomotives and railcars that are utilized for the carriage of persons or property
in interstate commerce.
b. Trucks and truck-tractors with a gross vehicle weight rating of 10,001 pounds
[4535.92 kilograms] or greater, trailers, semitrailers, or passenger buses that are:
(1) Registered through the international registration plan; and
(2) Operated under authority of a carrier authorized and certificated by the
United States department of transportation or another federal authority to
engage in the carriage of persons or property in interstate commerce.
c. Aircraft that are operated by air carriers authorized and certificated by the United
States department of transportation or another federal or a foreign authority to
engage in the carriage of persons or property in interstate or foreign commerce.
d. Containers designed for use on and component parts attached or secured on the
items set forth in subdivisions a, b, and c.
### § 57-39.4-11.1. (310.

1) Election for origin-based sourcing.
1. A member state that has local jurisdictions that levy or receive sales or use taxes may
elect to source the retail sale of tangible personal property and digital goods under the
provisions of this section in lieu of the provisions of subdivisions b, c, and d of
subsection 1 of section 57-39.4-11 if the state complies with subsection 3 of this
section and the only exception to section 57-39.4-11 is in subsection 2 of this section.
2. A member state may source retail sales, excluding lease or rental, of tangible personal
property or digital goods to the location where the order is received by the seller if:

a. The order is received in the same state by the seller where receipt of the product
by the purchaser or the purchaser's designated donee occurs;
b. The location where receipt of the product by the purchaser occurs is determined
under subdivisions b, c, and d of subsection 1 of section 57-39.4-11; and
c. At the time the order is received, the recordkeeping system of the seller used to
calculate the proper amount of sales or use tax to be imposed captures the
location where the order is received.
3. A member state electing to source sales under this section shall comply with all of the
following:
a. When the location where the order is received by the seller and the location
where the receipt of the product by the purchaser or the purchaser's designated
donee occurs as determined under subdivisions b, c, and d of subsection 1 of
section 57-39.4-11 are in different states, the sale must be sourced under the
provisions of section 57-39.4-11.
b. When the sale is sourced under this section to the location where the order is
received by the seller, only the sales tax for the location where the order is
received by the seller may be levied. No additional sales or use tax based on the
location where the product is delivered to the purchaser may be levied on that
sale. The purchaser shall not be entitled to any refund if the combined state and
local rate at the location where the product is received by the purchaser is lower
than the rate where the order is received by the seller.
c. A member state may not require a seller to use a recordkeeping system that
captures the location where the order is received to calculate the proper amount
of sales or use tax to be imposed.
d. A purchaser shall not have an additional liability to the state for tax, penalty, or
interest on a sale for which the purchaser remits tax to the seller in the amount
invoiced by the seller if the invoice amount is calculated at either the rate
applicable to the location where receipt by the purchaser occurs or at the rate
applicable to the location where the order is received by the seller. A purchaser
may rely on a written representation by the seller as to the location where the
order for the sale was received by the seller. When the purchaser does not have
a written representation by the seller as to the location where the order for the
sale was received by the seller, the purchaser may use the seller's business
address that is available from the purchaser's business records maintained in the
ordinary course of the purchaser's business to determine the rate applicable to
the location where the order was received.
e. The location where the order is received by or on behalf of the seller means the
physical location of a seller or third party such as an established outlet, office
location, or automated order receipt system operated by or on behalf of the seller,
where an order is initially received by or on behalf of the seller and not where the
order may be subsequently accepted, completed, or fulfilled. An order is received
when all of the information from the purchaser necessary to determine whether
the order can be accepted has been received by or on behalf of the seller. The
location from which a product is shipped must not be used in determining the
location where the order is received by the seller.
f. A member state must provide for direct pay permits under section 57-39.4-27 and
the requirements of this subsection. Purchasers that remit sales and use tax
under a direct pay permit shall remit tax at the rate in effect for the location where
receipt of the product by the purchaser occurs or the product is first used as
determined by state law. A member state may establish reasonable thresholds at
which the member state will consider direct pay applications, provided the
threshold must be based upon purchases with no distinction between taxable and
nontaxable purchases. The member state shall establish a process for application
for a direct pay permit as provided in this chapter. The member state may require
the direct pay permit applicant to demonstrate:
(1) An ability to comply with the sales and use tax laws of the state;

(2) A business purpose for seeking a direct pay permit and how the permit will
benefit tax compliance; and
(3) Proof of good standing under the tax laws of the state. The member state
shall review all permit applications in a timely manner. Notification of
authorization or denial must be received by applicants within one hundred
twenty days of application. The member state may not limit direct pay permit
applicants to businesses engaged in manufacturing or businesses that do
not know the ultimate use of the product at the time of the purchase.
g. When taxable services are sold with tangible personal property or digital products
under a single contract or in the same transaction, are billed on the same billing
statement, and because of the application of this section, would be sourced to
different jurisdictions, a member state shall elect either origin sourcing or
destination sourcing to determine a single situs for that transaction. The member
state election is required until the governing board adopts a uniform methodology
to address these sales.
h. A member state that elects to source the sale of tangible personal property and
digital goods under the provisions of this section shall inform the governing board
of the election.
### § 57-39.4-12. (311) General sourcing definitions.

For the purposes of subsection 1 of section 57-39.4-11, the terms "receive" and "receipt"
mean:
1. Taking possession of tangible personal property;
2. Making first use of services; or
3. 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.
### § 57-39.4-13. (312) Multiple points of use.

Repealed by S.L. 2007, ch. 528, § 24.
### § 57-39.4-14. (313) Direct mail sourcing.

1. For purposes of this section:
a. "Advertising and promotional direct mail" means:
(1) Printed material that meets the definition of direct mail, in appendix C, part I
of the agreement; and
(2) The primary purpose of which is to attract public attention to a product,
person, business, or organization, or to attempt to sell, popularize, or secure
financial support for a product, person, business, or organization. As used in
this subsection, the word "product" means tangible personal property, a
product transferred electronically, or a service.
b. "Other direct mail" means any direct mail that is not advertising and promotional
direct mail regardless of whether advertising and promotional direct mail is
included in the same mailing. The term includes:
(1) Transactional direct mail that contains personal information specific to the
addressee, including invoices, bills, statements of account, and payroll
advices;
(2) Any legally required mailings, including privacy notices, tax reports, and
stockholder reports; and
(3) Other nonpromotional direct mail delivered to existing or former
shareholders, customers, employees, or agents, including newsletters and
informational pieces.
Other direct mail does not include the development of billing information or the
provision of any data processing service that is more than incidental.

2. Notwithstanding sections 57-39.4-11 and 57-39.4-11.1, the following provisions apply
to sales of advertising and promotional direct mail:
a. A purchaser of advertising and promotional direct mail may provide the seller with
either:
(1) A direct pay permit;
(2) A streamlined sales and use tax agreement certificate of exemption claiming
direct mail or other written statement approved, authorized, or accepted by
the state; or
(3) Information showing the jurisdictions to which the advertising and
promotional direct mail is to be delivered to recipients.
b. If the purchaser provides the permit, certificate, or statement referred to in this
subsection, the seller, in the absence of bad faith, is relieved of all obligations to
collect, pay, or remit any tax on any transaction involving advertising and
promotional direct mail to which the permit, certificate, or statement applies. The
purchaser shall source the sale to the jurisdictions to which the advertising and
promotional direct mail is to be delivered to the recipients and shall report and
pay any applicable tax due.
c. If the purchaser provides the seller information showing the jurisdictions to which
the advertising and promotional direct mail is to be delivered to recipients, the
seller shall source the sale to the jurisdictions to which the advertising and
promotional direct mail is to be delivered and shall collect and remit the
applicable tax. In the absence of bad faith, the seller is relieved of any further
obligation to collect any additional tax on the sale of advertising and promotional
direct mail where the seller has sourced the sale according to the delivery
information provided by the purchaser.
d. If the purchaser does not provide the seller with any of the items listed in this
subsection, the sale shall be sourced according to subdivision e of subsection 1
of section 57-39.4-11. The state to which the advertising and promotional direct
mail is delivered may disallow credit for tax paid on sales sourced under this
subdivision.
3. Notwithstanding sections 57-39.4-11 and 57-39.4-11.1, the following provisions apply
to sales of other direct mail:
a. Except as otherwise provided in this subsection, sales of other direct mail are
sourced in accordance with subdivision c of subsection 1 of section 57-39.4-11.
b. A purchaser of other direct mail may provide the seller with either:
(1) A direct pay permit; or
(2) A streamlined sales and use tax agreement certificate of exemption claiming
direct mail or other written statement approved, authorized, or accepted by
the state.
c. If the purchaser provides the permit, certificate, or statement referred to in this
subsection, the seller, in the absence of bad faith, is relieved of all obligations to
collect, pay, or remit any tax on any transaction involving other direct mail to
which the permit, certificate, or statement applies. Notwithstanding subdivision a,
the sale shall be sourced to the jurisdictions to which the other direct mail is to be
delivered to the recipients and the purchaser shall report and pay any applicable
tax due.
4. a. This section applies to a transaction characterized under state law as the sale of
services only if the service is an integral part of the production and distribution of
printed material that meets the definition of direct mail.
b. This section does not apply to any transaction that includes the development of
billing information or the provision of any data processing service that is more
than incidental regardless of whether advertising and promotional direct mail is
included in the same mailing.
c. If a transaction is a "bundled transaction" that includes advertising and
promotional direct mail, this section shall apply only if the primary purpose of the

transaction is the sale of products or services that meet the definition of
advertising and promotional direct mail.
d. Nothing in this section shall limit any purchaser's:
(1) Obligation for sales or use tax to any state to which the direct mail is
delivered;
(2) Right under local, state, federal, or constitutional law, to a credit for sales or
use taxes legally due and paid to other jurisdictions; or
(3) Right to a refund of sales or use taxes overpaid to any jurisdiction.
e. This section applies for purposes of uniformly sourcing direct mail transactions
and does not impose requirements on states regarding the taxation of products
that meet the definition of direct mail or to the application of sales for resale or
other exemptions.
### § 57-39.4-14.1. (313.

1) Election for origin-based direct mail sourcing.
1. Notwithstanding sections 57-39.4-11, 57-39.4-11.1, and 57-39.4-14, a member state
may elect to source the sale of all direct mail delivered or distributed from a location
within the state and delivered or distributed to a location within the state under this
section.
2. If the purchaser provides the seller with a direct pay permit or a streamlined sales and
use tax agreement certificate of exemption claiming direct mail or other written
statement approved, authorized, or accepted by the state, the seller, in the absence of
bad faith, is relieved of all obligations to collect, pay, or remit the applicable tax on any
transaction involving direct mail. The purchaser must report and pay any applicable tax
due. A streamlined sales and use tax agreement certificate of exemption claiming
direct mail shall remain in effect for all future sales of direct mail by the seller to the
purchaser until it is revoked in writing.
3. Except as provided in subsections 2, 3, and 4, the seller shall collect the tax according
to subdivision e of subsection 1 of section 57-39.4-11. To the extent the seller knows
that a portion of the sale of direct mail will be delivered or distributed to a location in
another state, the seller shall collect the tax on that portion according to section
57-39.4-14.
4. Notwithstanding subsection 3, a seller may elect to use the provisions of section
5. Nothing in this section limits a purchaser's obligation for sales or use tax to any state
to which the direct mail is delivered, except that a purchaser whose direct mail is
sourced under subsection 3 shall owe no additional sales or use tax to that state
based on where the purchaser uses or delivers the direct mail in the state.
6. A member state that elects to source the sale of direct mail under the provisions of this
section shall inform the governing board in writing at least sixty days prior to the
beginning of the calendar quarter this election begins.
### § 57-39.4-15. (314) Telecommunications sourcing.

1. Except for the defined telecommunications services in subsection 3, the sale of
telecommunications services sold on a call-by-call basis shall be sourced to each level
of taxing jurisdiction where the call originates and terminates in that jurisdiction or each
level of taxing jurisdiction where the call either originates or terminates and in which
the service address is also located.
2. Except for the defined telecommunications services in subsection 3, 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.
3. The sale of the following telecommunications services shall be sourced to each level
of taxing jurisdiction as follows:
a. 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.

b. A sale of post-paid calling service is sourced to the origination point of the
telecommunications signal as first identified by either the seller's
telecommunications system, or information received by the seller from its service
provider, if the system used to transport such signals is not that of the seller.
c. A sale of prepaid calling service or a sale of a prepaid wireless calling service is
sourced in accordance with section 57-39.4-11. However, in the case of a sale of
prepaid wireless calling service, the rule provided in subdivision e of subsection 1
of section 57-39.4-11 shall include as an option the location associated with the
mobile telephone number.
d. A sale of a private communication service is sourced as follows:
(1) 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.
(2) 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.
(3) 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.
(4) 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.
4. The sale of internet access service is sourced to the customer's place of primary use.
5. The sale of an ancillary service is sourced to the customer's place of primary use.
### § 57-39.4-16. (315) Telecommunications sourcing definitions.

For the purpose of section 57-39.4-15, the following definitions apply:
1. "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.
2. "Ancillary services" means services that are associated with or incidental to the
provision of telecommunications services, including detailed telecommunications
billing, directory assistance, vertical service, and voice mail services.
3. "Call-by-call basis" means any method of charging for telecommunications services in
which the price is measured by individual calls.
4. "Communications channel" means a physical or virtual path of communications over
which signals are transmitted between or among customer channel termination points.
5. "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 services is the customer of
the telecommunications services, but this sentence only applies for the purpose of
sourcing sales of telecommunications services under section 57-39.4-15. "Customer"
does not include a reseller of telecommunications services or for mobile
telecommunications services of a serving carrier under an agreement to serve the
customer outside the home service provider's licensed service area.
6. "Customer channel termination point" means the location where the customer either
inputs or receives the communications.
7. "End user" means the person who utilizes the telecommunications services. In the
case of an entity, "end user" means the individual who utilizes the services on behalf of
the entity.
8. "Home service provider" means the same as that term is defined in section 124(5) of
Public Law 106-252, Mobile Telecommunications Sourcing Act.

9. "Mobile telecommunications service" means the same as that term is defined in
section 124(7) of Public Law 106-252, Mobile Telecommunications Sourcing Act.
10. "Place of primary use" means the street address representative of where the
customer's use of the telecommunications services 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.
11. "Post-paid calling service" means the telecommunications services 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 which a telephone number which is not associated with the origination
or termination of the telecommunications services. A post-paid calling service includes
telecommunications services, except a prepaid wireless calling service, that would be
a prepaid calling service except it is not exclusively telecommunications services.
12. "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 or 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.
13. "Prepaid wireless calling service" means a telecommunications service that provides
the right to utilize mobile wireless service as well as other nontelecommunications
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 or dollars of which the number declines with use in a known amount.
14. "Private communication service" means telecommunications services that entitle 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.
15. "Service address" means:
a. 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.
b. If the location in subdivision a 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.
c. If the location in subdivisions a and b are not known, the service address means
the location of the customer's place of primary use.
### § 57-39.4-17. (316) Enactment of exemptions.

A member state shall enact entity-based, use-based, and product-based exemptions in
accordance with the provisions of this section and utilize common definitions in accordance with
the provisions of section 57-39.4-28 and the agreement.
1. A member state may enact a product-based exemption without restriction if the
agreement does not have a definition for the product.
a. A member state may enact a product-based exemption for a product if the
agreement has a definition for such product and the member state utilizes in the
exemption the product definition in a manner consistent with the agreement and
section 57-39.4-28.
b. A member state may enact a product-based exemption exempting all items
included within a definition in the agreement but shall not exempt specific items
included within the product definition unless the product definition sets out an
exclusion for such item.

2. A member state may enact an entity-based or a use-based exemption for a product
without restriction if the agreement does not have a definition for the product.
a. A member state may enact an entity-based or a use-based exemption for a
product if the agreement has a definition for such product and the member state
utilizes in the exemption the product definition in a manner consistent with the
agreement and section 57-39.4-28.
b. A member state may enact an entity-based exemption for an item if the
agreement does not have a definition for such items but has a definition for a
product that includes such item.
c. A member state may not enact a use-based exemption for an item which
effectively constitutes a product-based exemption if the agreement has a
definition for a product that includes such item.
d. A member state may enact a use-based exemption for an item if the agreement
has a definition for a product that includes such item, if not prohibited in
subdivision c and if consistent with a definition in the agreement.
For purposes of complying with the requirements in this section, the inclusion of a product within
the definition of tangible personal property is disregarded.
### § 57-39.4-18. (317) Administration of exemptions.

1. Each member state shall observe the following provisions when a purchaser claims an
exemption:
a. 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.
b. A purchaser is not required to provide a signature to claim an exemption from tax
unless a paper exemption certificate is used.
c. The seller shall use the standard form for claiming an exemption electronically as
adopted by the governing board.
d. The seller shall obtain the same information for proof of a claimed exemption
regardless of the medium in which the transaction occurred.
e. A member state may utilize a system in which 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.
f. The seller shall maintain proper records of exempt transactions and provide them
to a member state when requested.
g. A member state shall administer use-based and entity-based exemptions when
practicable through a direct pay permit, an exemption certificate, or another
means that does not burden sellers.
h. In the case of drop shipment sales, member states must allow a third-party
vendor, drop shipper, to claim a resale exemption based on an exemption
certificate by its customer or reseller or any other acceptable information
available to the third-party vendor evidencing qualification for a resale exemption,
regardless of whether the customer or reseller is registered to collect and remit
sales and use tax in the state where the sale is sourced.
2. 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 the subject of the transaction sought to be covered by
the exemption certificate is actually received by the purchaser at a location operated
by the seller and the state in which that location resides provides an exemption
certificate that clearly and affirmatively indicates that the claimed exemption is not
available in that state. Graying out exemption reason types on the uniform form and
posting it on a state's website is an indicator.

3. Each member 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 ninety days subsequent to the date of sale. A
member state may provide for a period longer than ninety days for the seller to obtain
the necessary information.
4. If the seller has not obtained an exemption certificate or all relevant data elements as
provided by this section, a member state shall provide the seller with one hundred
twenty days subsequent to a request for substantiation by a member state, to either
obtain:
a. A fully completed exemption certificate from the purchaser, taken in good faith
which means that the seller obtain a certificate that claims an exemption that was
statutorily available on the date of the transaction in the jurisdiction where the
transaction is sourced, could be applicable to the item being purchased, and is
reasonable for the purchaser's type of business; or
b. Other information establishing that the transaction was not subject to the tax. A
member state may provide for a period longer than one hundred twenty days for
sellers to obtain the necessary information.
c. If the seller obtains the information described in this subsection, the member
state shall relieve the seller of any liability for the tax on the transaction unless it
is discovered through the audit process that the seller had knowledge or had
reason to know at the time such information was provided that the information
relating to the exemption claimed was materially false or the seller otherwise
knowingly participated in activity intended to purposefully evade the tax that is
properly due on the transaction. The state must establish that the seller had
knowledge or had reason to know at the time the information was provided that
the information was materially false.
5. 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.
6. Each member state shall relieve a seller of the tax otherwise applicable if it obtains a
blanket exemption certificate from a purchaser with which the seller has a recurring
business relationship. Notwithstanding the provisions of subsection 5, a member state
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.
7. Each member state shall post on its website the uniform paper exemption certificate,
streamlined sales and use tax exemption certificate, as revised and adopted by the
governing board, with any applicable graying out of nonapplicable exemption types
under subsection 2.
### § 57-39.4-19. (318) Uniform tax returns.

Each member state shall:
1. Require that only a single tax return for each taxing period for each seller be filed for
the member state to include all the taxing jurisdictions within the member state.
2. a. Require that returns be due no sooner than the twentieth day of the month
following the month in which the transaction occurred.
b. When the due date for a return falls on a Saturday or Sunday or legal holiday in
the subject member state, the return shall be due on the next succeeding
business day. If the return is filed in conjunction with a remittance and the
remittance cannot be made under subdivision b of subsection 5 of section
57-39.4-20, the return shall be accepted as timely filed on the same day as the
remittance under that subsection.

3. Make available to all sellers, whether or not registered under the agreement, except
sellers of products qualifying for exclusion from the provisions of section 57-39.4-09 of
this agreement, a simplified return that is filed electronically as follows:
a. The simplified electronic return hereinafter SER shall be in a form approved by
the governing board and shall contain only those fields approved by the
governing board. The SER shall contain two parts. Part 1 shall contain
information relating to remittances and allocations and part 2 shall contain
information relating to exempt sales.
b. Each member state must notify the governing board if it requires the submission
of the part 2 information provided no state may require the submission of part 2
information from a model 4 seller which has no legal requirement to register in the
state.
c. Returns shall be required as follows:
(1) Certified service providers must file an SER in all member states in which
the model 1 seller is registered under the agreement, on behalf of model 1
sellers. Certified service providers, on behalf of these sellers, shall file the
audit reports provided for in article V of the rules and procedures of the
agreement for the states, and in addition, shall be required to file part 1 of
the SER each month for each member state in which the model 1 seller is
registered under the agreement. A state shall allow a model 1 seller to file
both part 1 and part 2 of the SER. A model 1 seller which chooses to file
both part 1 and part 2 of the SER shall still be required to file the audit
reports provided for in article V of the rules and procedures of the
agreement.
(2) Model 2 and model 3 sellers must file an SER in all member states in which
they are registered under the agreement. These sellers shall file part 1 of
the SER every month for all states in which they are registered under the
agreement. These sellers shall have the following options for meeting their
obligation to furnish part 2 information:
(a) File part 2 of the SER together with part 1 of the SER every month; or
(b) File part 2 of the SER at the same time part 1 of the SER for the
month of December is due. Part 2 information filed under this option
shall cover the month of December and all previous months of the
same calendar year and shall only require annual and not monthly
totals. The sellers shall only be required to file part 2 of the SER for
any state which has notified the governing board that it will require the
submission of the part 2 information under subdivision b.
(3) Every member state shall allow model 4 sellers to file an SER. The sellers
shall file part 1 of the SER every month unless a state allows less frequent
filing. Model 4 sellers which have a legal requirement to register in the state
shall have the following options for meeting their obligation to furnish part 2
information:
(a) File part 2 of the SER together with part 1 of the SER; or
(b) File part 2 of the SER at the same time part 1 of the SER for the
month of December is due. Part 2 information filed under this option
shall cover the month of December and all previous months of the
same calendar year and shall only require annual and not monthly
totals.
These sellers shall only be required to file part 2 of the SER for any
state which has notified the governing board that it will require the
submission of the part 2 information under subdivision b.
Model 4 sellers which elect not to file an SER shall file returns in the
form under schedules afforded to sellers not registered under the agreement
according to the requirements of each member state.
(4) Every member state shall allow sellers not registered under the agreement
that are registered in the state to file an SER. These sellers shall file part 1

of the SER every month unless a state allows less frequent filing and shall
have the following options for meeting their obligation to furnish part 2
information:
(a) File part 2 of the SER together with part 1 of the SER; or
(b) File part 2 of the SER at the same time part 1 of the SER for the
month of December is due. Part 2 information filed under this option
shall cover the month of December and all previous months of the
same calendar year and shall only require annual and not monthly
totals.
These sellers shall only be required to file part 2 of the SER for any state
which has notified the governing board that it will require the submission of
the part 2 information under subdivision b.
d. A state which requires the submission of part 2 information under paragraph 2
may provide an exemption from this requirement to a seller under terms and
conditions set out by the state.
e. A state may require a seller which elects to file an SER to give at least three
months' notice of the seller's intent to discontinue filing an SER.
4. Adopt web services as the standardized transmission process that allows for receipt of
uniform tax returns and other formatted information as approved by the governing
board. The process must provide for the filing of separate returns for multiple legal
entities in a single transmission for each state and will not include any requirement for
manual entry or input by the seller of any of the aforementioned information. This
process will allow a certified service provider, tax preparer, or any other authorized
person to file returns for more than one seller in a single electronic transmission.
However, sellers filing returns for multiple legal entities may only do so for affiliated
legal entities.
5. Give notice to a seller registered under this agreement which has no legal requirement
to register in the state, of a failure to file a required return and a minimum of thirty days
to file thereafter prior to establishing a liability amount for taxes based solely on the
seller's failure to timely file a return provided a member state may establish a liability
amount for taxes based solely on the seller's failure to timely file a return if such seller
has a history of nonfiling or late filing.
6. Nothing in this section shall prohibit a state from allowing additional return options or
the filing of returns less frequently.
### § 57-39.4-20. (319) Uniform rules for remittance of funds.

Each member state shall:
1. 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 in the agreement. 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.
2. Require, at each member state's discretion, all remittances in payment of taxes
reported on the approved simplified return format to be remitted electronically.
3. Allow for electronic payments by all remitters by both automated clearinghouse credit
and automated clearinghouse debit.
4. Provide an alternative method for making same day payments if an electronic funds
transfer fails.
5. a. Provide that if a due date for a payment falls on a Saturday, Sunday, or legal
holiday in a member state, the payment, including any related payment voucher
information, is due to that state on the next succeeding business day.
b. Additionally, if the federal reserve bank is closed on a due date that prohibits a
person from being able to make a payment by automated clearinghouse debit or

credit, that payment shall be accepted as timely if made on the next day the
federal reserve bank is open.
6. Require that any data that accompanies a remittance be formatted using uniform tax
type and payment type codes approved by the governing board.
7. Adopt a standardized transmission process approved by the governing board that
allows for the remittance in an SER of a single bulk payment for taxes reported on
multiple SERs by affiliated entities, certified service providers, or preparers. Each state
shall comply with this provision no later than two years after the governing board
approves such a standardized transmission process.
### § 57-39.4-21. (320) 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:
1. Allow a deduction from taxable sales for bad debts. Any deduction taken that is
attributed to bad debts shall not include interest.
2. Utilize the federal definition of "bad debt" in 26 U.S.C. 166 as the basis for calculating
bad debt recovery. However, the amount calculated pursuant to 26 U.S.C. 166 shall be
adjusted to exclude financing charges or interest, sales or use taxes charged on the
purchase price, uncollectible 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.
3. Allow bad debts to be deducted on the return for the period during which the bad debt
is written off as uncollectible 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 uncollectible 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.
4. 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.
5. 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.
6. When filing responsibilities have been assumed by a certified service provider, allow
the certified service provider to claim, on behalf of the seller, any bad debt allowance
provided by this section. The certified service provider must credit or refund the full
amount of any bad debt allowance or refund received to the seller.
7. 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.
8. When 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.
### § 57-39.4-22. (321) Confidentiality and privacy protections under model 1.

1. 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.
2. 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.
3. 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
certified service provider shall perform its tax calculation, remittance, and reporting
functions without retaining the personally identifiable information of consumers.
4. The governing board may certify a certified service provider only if that certified service
provider certifies that:
a. Its system has been designed and tested to ensure that the fundamental precept
of anonymity is respected;
b. Personally identifiable information is only used and retained to the extent
necessary for the administration of model 1 with respect to exempt purchasers
and for proper identification of taxing jurisdictions;
c. It provides consumers clear and conspicuous notice of its information practices,
including what information it 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 website of
the certified service provider;
d. The 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 for documentation of the correct
assignment of taxing jurisdictions; and
e. It provides adequate technical, physical, and administrative safeguards so as to
protect personally identifiable information from unauthorized access and
disclosure.
5. 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.
6. When any personally identifiable information that has been collected and retained is
no longer required for the purposes set forth in subdivision d of subsection 4, such
information shall no longer be retained by the member states.
7. 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 the individual's own information in the state's possession and a right to
correct any inaccurately recorded information.
8. 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 which
the information is sought should make a reasonable and timely effort to notify the
individual of such request.
9. This privacy policy is subject to enforcement by member states' attorneys general or
other appropriate state government authority.
10. Each member state's 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:
a. Conduct audits or other review as provided under the agreement and state law.
b. Provide records pursuant to a member state's freedom of information act,
disclosure laws with governmental agencies, or other regulations.
c. Prevent, consistent with state law, disclosures of confidential taxpayer
information.
d. Prevent, consistent with federal law, disclosures or misuse of federal return
information obtained under a disclosure agreement with the internal revenue
service.

e. Collect, disclose, disseminate, or otherwise use anonymous data for
governmental purposes.
11. This privacy policy does not preclude the governing board from certifying a certified
service provider whose privacy policy is more protective of confidential taxpayer
information or personally identifiable information than is required by the agreement.
### § 57-39.4-23. (322) Sales tax holidays.

1. If a member state allows for temporary exemption periods, commonly referred to as
sales tax holidays, the member state shall:
a. Not apply an exemption unless the items to be exempted are specifically defined
in part II or part III(B) of the library of definitions and the exemptions are uniformly
applied to state and local sales and use taxes.
b. Provide notice of the exemption period at least sixty days prior to the first day of
the calendar month in which the exemption period will begin.
c. Not apply an entity-based or use-based exemption except a member state may
limit a product-based exemption to items purchased for personal or nonbusiness
use.
d. Not require a seller to obtain an exemption certificate or other certification from a
purchaser for items to be exempted during a sales tax holiday.
2. 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.
3. The following procedures are to be used by member states in administering a sales
tax holiday exemption:
a. Layaway sales. A sale of eligible property under a layaway sale qualifies for
exemption if:
(1) Final payment on a layaway order is made by, and the property is given to,
the purchaser during the exemption period; or
(2) 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.
b. 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.
c. Discounts and coupons. A discount by a 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
shall allocate the discount based on the total sales prices of the taxable property
compared to the total sales prices of all property sold in that same transaction.
d. Splitting of items normally sold together. Items that are normally sold as a single
unit must continue to be sold in that manner and cannot be priced separately and
sold as individual items in order to obtain a sales tax holiday.
e. Rainchecks. A raincheck is a means to allow 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 is purchased during the exemption period with use of a raincheck
qualifies for the exemption regardless of when the raincheck was issued.
Issuance of a raincheck during the exemption period does not qualify eligible
property for the exemption if the property is purchased after the exemption
period.

f. Exchanges. The procedure for an exchange of eligible property purchased during
a sales tax holiday is as follows:
(1) If a customer purchases an item of eligible property during the exemption
period, and later exchanges the item for a similar eligible item, even if a
different size, different color, or other feature, no additional tax is due if the
exchange is made after the exemption period.
(2) If a customer purchases an item of eligible property during the exemption
period, and returns the item and receives credit on the purchase of a
different item after the exemption period, the appropriate sales tax is due on
the sale of the newly purchased item.
(3) If a customer purchases an item of eligible property before the exemption
period, returns the item, and receives credit on the purchase of a different
item of eligible property during the exemption period, no sales tax is due on
the sale of the new item if the new item is purchased during the exemption
period.
g. 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 purpose 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, the seller does not have to allocate the delivery
charge to determine if the price threshold is exceeded and 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:
(1) 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
(2) 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 is not
required to tax the percentage allocated to the eligible property.
h. Order date and back orders. For the purpose of a sales tax holiday, eligible
property qualifies for exemption if:
(1) The item is both delivered to and paid for by the customer during the
exemption period; or
(2) 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. For purposes of this subsection, 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.
i. Returns. For a sixty-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 sixty day
period is 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 sixty-day period does not require the seller to change
the seller's policy on the time period during which the seller will accept returns.

j. 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.
### § 57-39.4-24. (323) Caps and thresholds.

1. No member state may 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 or 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.
2. No member state that has local jurisdictions that levy a sales or use tax may 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.
3. 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 when the burden of administration has been
shifted from the retailer.
4. For states that have a cap or threshold on clothing before January 1, 2006, the
provisions of this section do not apply to sales or use tax thresholds for exemptions
that are based on the value of "essential clothing" except as provided in the library of
definitions.
### § 57-39.4-25. (324) Rounding.

1. After December 31, 2005, each member state shall adopt a rounding algorithm that
meets the following criteria:
a. Tax computation must be carried to the third decimal place; and
b. 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.
2. 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.
### § 57-39.4-26. (325) Customer refund procedures.

1. This section applies when a state allows a purchaser to seek a return of over-collected
sales or use taxes from the seller.
2. 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.
3. This section provides 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.
4. 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 uses either a provider or a system,
including a proprietary system, which is certified by the state and has remitted to the
state all taxes collected less any deductions, credits, or collection allowances.

### § 57-39.4-27. (326) 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.
### § 57-39.4-28. (327) 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 agreement adopted by
section 57-39.4-01. A member state shall adhere to the following principles:
1. 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 or
adopt the library definition of the term in its statutes or administrative rules or
regulations in substantially the same language as the library definition.
2. 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.
3. Except as specifically provided in sections 57-39.4-17 and 57-39.4-33.1, and the
library of definitions, a member state shall impose a sales or use tax on all products or
services included within each part II or part III(B) definition or exempt from sales or use
tax all products or services within each definition, including all products and services
listed in the rules, appendices, and interpretive opinions adopted by the governing
board. The requirements of this section shall only apply to part III(B) definitions to the
extent such definitions are used in the administration of a sales tax holiday. A member
state is not in compliance with the agreement if the member state excludes any
product or service that is included within a product definition or includes a product or
service that is excluded from a product definition.
### § 57-39.4-29. (328) Taxability matrix.

1. a. To ensure uniform application of terms defined in part II and part III(B) of the
library as adopted by the governing board under section 57-39.4-28, each
member state shall complete, to the best of its ability, the section of the taxability
matrix titled "library of definitions".
b. To inform the general public of its practices regarding certain tax administration
practices as selected by the governing board under section 57-39.4-33.4, each
member state shall complete, to the best of its ability, the section of the taxability
matrix titled "tax administration practices".
2. The member state's entries in the taxability 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.
3. A member state shall relieve sellers and certified service providers 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 certified service provider relying
on erroneous data provided by the member state in the library section of the taxability
matrix. If a member state amends an existing provision of the library section of its
taxability matrix, the member state shall, to the extent possible, relieve sellers and
certified service providers from liability to the member state and its local jurisdictions
until the first day of the calendar month that is at least thirty days after notice of
change to a member state's library section of the taxability matrix is submitted to the
governing board, provided the seller or certified service provider relied on the prior
version of the taxability matrix.

4. To the extent possible, the member state shall relieve sellers and certified service
providers 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 certified service provider relying on erroneous data provided by the member state in
the tax administration practices section of the taxability matrix. If a member state
amends an existing provision of the tax administration practices section of its taxability
matrix, the member state shall, to the extent possible, relieve sellers and certified
service providers from liability to the member state and its local jurisdictions until the
first day of the calendar month which is at least thirty days after notice of a change to a
member state's tax administration practices section of the taxability matrix is submitted
to the governing board, provided the seller or certified service provider relied on the
prior version of the taxability matrix.
5. If a state levies sales and use tax on a specified digital product and provides an
exemption for an item within the definition of such specified digital product under
subsection 8 of section 57-39.4-33.1, such exemption must be noted in the library
section of the taxability matrix.
6. Each state that provides for a sales tax holiday under section 57-39.4-23 shall, in a
format approved by the governing board, give notice in the library section of the
taxability matrix of the products for which a tax exemption is provided.
### § 57-39.4-30. (329) 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:
1. For a rate increase, the new rate shall apply to the first billing period starting on or
after the effective date.
2. For a rate decrease, the new rate shall apply to bills rendered on or after the effective
date.
### § 57-39.4-31. Membership of streamlined sales tax governing board.

The streamlined sales tax governing board consists of:
1. The tax commissioner or the commissioner's designee;
2. One member appointed by the majority leader of the senate; and
3. One member appointed by the majority leader of the house of representatives.
### § 57-39.4-32. (330) Bundled transactions.

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

c. The provisions of this section shall apply unless otherwise provided by federal
law.
4. In the case of a transaction that includes an "optional computer software maintenance
contract" for prewritten computer software and the state otherwise has not specifically
imposed tax on the retail sale of computer software maintenance contracts, the
following provisions apply:
a. If an optional computer software maintenance contract only obligates the vendor
to provide upgrades and updates, it will be characterized as a sale of prewritten
computer software.
b. If an optional computer software maintenance contract only obligates the vendor
to provide support services, it will be characterized as a sale of services.
c. If an optional computer software maintenance contract is a bundled transaction in
which both taxable and nontaxable or exempt products that are not separately
itemized on the invoice or similar billing document, the contract shall be
characterized as all taxable.
### § 57-39.4-33. (331) Relief from certain liability for purchasers.

1. A member state shall relieve a purchaser from liability for penalty to that member state
and its local jurisdictions for having failed to pay the correct amount of sales or use tax
in the following circumstances:
a. A purchaser's seller or certified service provider relied on erroneous data
provided by that member state on tax rates, boundaries, taxing jurisdiction
assignments, or in the taxability matrix completed under section 57-39.4-29.
b. A purchaser holding a direct pay permit relied on erroneous data provided by that
member state on tax rates, boundaries, taxing jurisdiction assignments, or in the
taxability matrix completed by that member state under section 57-39.4-29.
c. A purchaser relied on erroneous data provided by that member state in the
taxability matrix completed by that member state under section 57-39.4-29.
d. A purchaser using databases under subsections 6, 7, and 8 of section 57-39.4-06
relied on erroneous data provided by that member state on tax rates, boundaries,
or taxing jurisdiction assignments. After providing adequate notice as determined
by the governing board, a member state that provides an address-based
database for assigning taxing jurisdictions under subsection 7 or 8 of section
on the database provided by the member state under the provisions of
subsection 6 of section 57-39.4-06.
2. Except when prohibited by a member state's constitution, a member state shall also
relieve a purchaser from liability for tax and interest to that member state and its local
jurisdictions for having failed to pay the correct amount of sales or use tax in the
circumstances described in subsection 1, provided that with respect to reliance on the
taxability matrix completed by that member state under section 57-39.4-29, such relief
is limited to the state's erroneous classification in the taxability matrix of terms included
in the agreement as "taxable", "exempt", "included in sales price", "excluded from
sales price", "included in the definition", or "excluded from the definition".
3. For purposes of this section, the term "penalty" means an amount imposed for
noncompliance that is not fraudulent, willful, or intentional which is in addition to the
correct amount of sales or use tax and interest.
4. A member state may allow relief on terms and conditions more favorable to a
purchaser than the terms required by this section.
### § 57-39.4-33.1. (332) Specified digital products.

1. A member state shall not include "specified digital products", "digital audiovisual
works", "digital audio works", or "digital books" within its definition of "ancillary
services", "computer software", "telecommunication services", or "tangible personal
property". This restriction applies whether the "specified digital product" is sold to a
purchaser who is an end user or to a purchaser with less than the right of permanent

use granted by the seller, or use by the purchaser which is conditioned upon continued
payment from the purchaser. Until January 1, 2010, the exclusion of "specified digital
products" from the definition of "tangible personal property" does not affect the
classification of products transferred electronically that are not included within the
definition of "specified digital products" as being included in, or excluded from, the
definition of "tangible personal property".
2. For purposes of subsection 3 of section 57-39.4-28 and the taxability matrix, "digital
audiovisual works", "digital audio works", and "digital books" are separate definitions.
3. If a state imposes a sales or use tax on products transferred electronically separately
from its imposition of tax on "tangible personal property", the state will not be required
to use the terms "specified digital product", "digital audiovisual works", "digital audio
works", or "digital books", or enact an additional or separate sales or use tax on any
"specified digital product".
4. For purposes of the agreement:
a. A statute imposing a tax on "specified digital products", "digital audiovisual
works", "digital audio works", or "digital books" and, after January 1, 2010, a tax
on any other product transferred electronically must be construed as only
imposing the tax on a sale to a purchaser who is an end user unless the statute
specifically imposes and separately enumerates the tax on a sale to a purchaser
who is not an end user. For purposes of this section, an "end user" includes any
person other than a person who receives by contract a product transferred
electronically for further commercial broadcast, rebroadcast, transmission,
retransmission, licensing, relicensing, distribution, redistribution, or exhibition of
the product, in whole or in part, to another person or persons. A person who
purchases products transferred electronically, or the code for specified digital
products for the purpose of giving away such products or code shall not be
considered to have engaged in the distribution or redistribution of such products
or code and shall be treated as an end user.
b. A statute imposing a tax on "specified digital products", "digital audiovisual
works", "digital audio works", or "digital books" and, after January 1, 2010, on any
other product transferred electronically must be construed as only imposing tax
on a sale with the right of permanent use granted by the seller unless the statute
specifically imposes and separately enumerates the tax on a sale with the right of
less than permanent use granted by the seller. For purposes of this section
"permanent" means perpetual or for an indefinite or unspecified length of time. A
right of permanent use shall be presumed to have been granted unless the
agreement between the seller and the purchaser specifies or the circumstances
surrounding the transaction suggest or indicate that the right to use terminates on
the occurrence of a condition subsequent.
c. A statute imposing a tax on "specified digital products", "digital audiovisual
works", "digital audio works", or "digital books" and, after January 1, 2010, on any
other product transferred electronically shall be construed as only imposing tax
on a sale which is not conditioned upon continued payment from the purchaser
unless the statute specifically imposes and separately enumerates the tax on a
sale which is conditioned upon continued payment from the purchaser.
d. A member state which imposes a sales or use tax on the sale of a product
transferred electronically to a person other than the end user or on a sale with the
right of less than permanent use granted by the seller or which is conditioned
upon continued payment from the purchaser shall so indicate in its taxability
matrix in a format approved by the governing board.
5. Nothing in this section or the definition of "specified digital products" shall limit a state's
right to impose a sales or use tax or exempt from sales or use tax any products or
services that are outside the definition of "specified digital products".
6. A state may treat a subscription to products transferred electronically differently than a
nonsubscription purchase of such product. For purposes of this section, "subscription"
means an agreement with a seller that grants a consumer the right to obtain products

transferred electronically from within one or more product categories having the same
tax treatment, in a fixed quantity or for a fixed period of time, or both.
7. The tax treatment of a "digital code" shall be the same as the tax treatment of the
"specified digital product" or product transferred electronically to which the "digital
code" relates. The retail sale of the "digital code" shall be considered the transaction
for purposes of the agreement. For purposes of this section, "digital code" means a
code, which provides a purchaser with a right to obtain one or more such products
having the same tax treatment. A "digital code" may be obtained by any means,
including electronic mail or by tangible means regardless of its designation as "song
code", "video code", or "book code".
8. Notwithstanding the provisions of section 57-39.4-17, a member state may provide a
product-based exemption for specific items within the definition of "specified digital
products", provided the items which are not transferred electronically must also be
granted a product-based exemption by the member state.
9. For purposes of this section and section 57-39.4-33.2, the term "transferred
electronically" means obtained by the purchaser by means other than tangible storage
media.
### § 57-39.4-33.2. (333) Use of specified digital products.

A member state shall not include any product transferred electronically in its definition of
"tangible personal property". "Ancillary services", "computer software", and "telecommunication
services" are excluded from the phrase "products transferred electronically".
### § 57-39.4-33.3. (334) Replacement tax prohibited.

No member state may have a prohibited replacement tax on any product defined in part II or
part III(B) of the library of definitions which has the effect of avoiding the intent of this
agreement.
### § 57-39.4-33.4. (335) Tax administration practices.

1. For purposes of this section, tax administration practices consist of the following:
a. "Disclosed practice", which means a tax practice that the governing board selects
and requires each member state to disclose under subsection 2; and
b. "Best practice", which means is a disclosed practice selected by the governing
board as a best practice under subsection 3.
2. The governing board shall select a disclosed practice using the following procedures:
a. The state and local advisory council shall develop a practice for disclosure under
the guidelines set forth in governing board rule 335.
b. The governing board shall provide public notice and opportunity for comment
prior to voting on a motion to approve selection of a tax practice for disclosure.
c. If a disclosed practice and a best practice are under concurrent development
under rule 335, the governing board first shall vote on whether the practice is a
disclosed practice before proceeding on a vote on whether the practice should be
selected as a best practice.
d. A majority vote of the entire governing board is required to approve a motion to
select a tax practice for disclosure.
3. The governing board shall select a best practice using the following procedures:
a. The state and local advisory council shall develop a best practice under the
guidelines set forth in governing board rule 335 only from among the disclosed
practices or from tax practices in concurrent development under subsection 2.
b. The governing board shall provide notice and opportunity for public comment
before voting on a motion to approve selection of a best practice.
c. A three-fourths vote of the entire governing board is required to approve a motion
to select a best practice.
4. Tax administration practices must be maintained in an appendix to the agreement.

5. A state may not be found to be out of compliance with the agreement because the
effect of the state's laws, rules, regulations, and policies do not follow a tax
administration practice. Following a tax administration practice is voluntary. All member
states are encouraged to follow each best practice.
6. Each state shall complete and submit to the executive director for posting on the
governing board's website the tax administration practices section of the taxability
matrix by the first day of the calendar month which is at least sixty days after the date
the governing board approves a motion to select a disclosed or best practice, or both,
or the date specified by the governing board, whichever is later.
7. Using the procedure for updating the taxability matrix, the executive director shall
make the necessary updates to the taxability matrix template no later than thirty days
after the date the governing board approves a motion to select a disclosed or best
practice.
8. All best practices existing on May 11, 2015, are disclosed practices. The executive
director shall implement this provision without changing any of the member states'
responses.
9. A disclosed practice may subsequently be modified or become a best practice by
following the provisions set forth in this section.
### § 57-39.4-34. (501) Certification of service providers and automated systems.

1. The governing board shall certify automated systems and service providers to aid in
the administration of sales and use tax collections.
2. The governing board may certify a person as a certified service provider if the person
meets all of the following requirements:
a. The person uses a certified automated system;
b. The person integrates its certified automated system with the system of a seller
for whom the person collects tax so that the tax due on a sale is determined at
the time of the sale;
c. The person agrees to remit the taxes it collects at the time and in the manner
specified by the member states;
d. The person agrees to file returns on behalf of the sellers for whom it collects tax;
e. The person agrees to protect the privacy of tax information it obtains in
accordance with section 57-39.4-22; and
f. The person enters into a contract with the member states and agrees to comply
with the terms of the contract.
3. The governing board may certify a software program as a certified automated system
if the governing board determines that the program meets all of the following
requirements:
a. It determines the applicable state and local sales and use tax rate for a
transaction, in accordance with sections 57-39.4-10 through 57-39.4-17,
inclusive;
b. It determines whether an item is exempt from tax;
c. It determines the amount of tax to be remitted for each taxpayer for a reporting
period;
d. It can generate reports and returns as required by the governing board; and
e. It can meet any other requirement set by the governing board.
The governing board may establish one or more sales tax performance standards for
model 3 sellers that meet the eligibility criteria set by the governing board and that
developed a proprietary system to determine the amount of sales and use tax due on
transactions.
### § 57-39.4-35. (502) State review and approval of certified automated system software

and certain liability relief.
1. Each member state shall review software submitted to the governing board for
certification as a certified automated system as provided for in this chapter. Such
review shall include a review to determine that the program accurately reflects the

taxability of the product categories included in the program. Upon approval by the
state, the state shall certify to the governing board its acceptance of the system
determination of the taxability of the product categories included in the program.
2. Each member state shall relieve certified service providers and model 2 sellers from
liability to the member state and local jurisdictions for not collecting sales or use taxes
resulting from the certified service provider or model 2 seller relying on the certification
provided by the member state.
3. Each member state shall provide relief from liability to certified service providers for
not collecting sales and use taxes in the same manner as provided to sellers under the
provisions of section 57-39.4-18.
4. The governing board and the member states shall not be responsible for classification
of an item or transaction within the product categories certified. The relief from liability
provided in this section shall not be available for a certified service provider or model 2
seller that has incorrectly classified an item or transaction into a product category
certified by a member state. This subsection shall not apply to the individual listing of
items or transactions within a product definition approved by the governing board or
the member states.
5. If a member state determines that an item or transaction is incorrectly classified as to
its taxability, it shall notify the certified service provider or model 2 seller of the
incorrect classification. The certified service provider or model 2 seller shall have ten
days to revise the classification after receipt of notice from the member state of the
determination. Upon expiration of the ten days, the certified service provider or
model 2 seller shall be liable for the failure to collect the correct amount of sales or use
taxes due and owing to the member state.
6. For purposes of this section:
a. "Certify a product category" means the state reviews the product category and
determines that the taxability of a product properly included in that product
category is consistent with that state's laws. The state certifies that the taxability
is based only on:
(1) The product-based exemptions or impositions provided by state law;
(2) The specific description provided by the seller or certified service provider;
and
(3) Not requiring either the purchaser or seller to produce documentation to
claim the exemption.
b. (1) "Product category" means:
(a) Terms specifically defined in appendix C, part II or part III of the
agreement, such as clothing, durable medical equipment, food, drugs,
soft drinks, and disaster preparedness supplies;
(b) Subcategories of terms specifically defined in subparagraph a that
may be taxed differently than the product category as a whole, such
as oxygen delivery equipment, kidney dialysis equipment, prewritten
computer software delivered electronically, and prepared food that
requires additional cooking by the consumer;
(c) Terms representing groups of like products that do not fall within
subparagraph a or b, such as other digital products, building materials,
furniture, or motor vehicles; and
(d) Subcategories of subparagraph c that are taxed differently than the
product category as a whole, such as printed materials, newspapers,
and catalogs.
(2) The term does not include any individual product that properly falls within
any product category in a state, such as shirts, reusable thermometers,
ultrasound machines, bread, tables, chairs, automobiles, or motorcycles,
unless the individual product is taxed differently than any other products
within that product category; or "tangible personal property".
