St. Peterburg
Hilton Hotel
St. Petersburg,
Florida
March 19, 2001
Dan Bucks, MTCHarley Duncan, FTA
Melissa Lewis, CA BOE
Kevin O’Donnell, FL
Jake Hoffman, ID
Ken Lovett, IL
Terry Garber, SC
Joan Serfling, SD
Mark Maxwell and Rob Rice, WA (substituting for Will Rice, WA) (via telephone)
Industry
Deborah Bierbaum, AT&T
Pam Cooper, Bellsouth
Other
Robynn Wilson, AK
Nancy Tucker, DC
Fred Nicely, OH
Jonathan Lyon, FTA
Matt Tomalis FTA (via telephone)
Roxanne Bland, MTC
Rene Blocker, MTC
Elliott Dubin, MTC
Jason Lumia, MTC
I don’t know who the following people are—do you?
Dave Sonoma (?)
Jerry Anderson (?)
Bill Speckman (?)
Deborah Cunningham (?)
I. Welcome and Public Comment
Harley Duncan and Dan Bucks opened the meeting, and requested comments from the public. There were none.
II. Overview
Messrs. Duncan and Bucks gave a brief description of the described the purpose of the task force, and what it is intended to accomplish.
Roxanne Bland, MTC, briefly described the Mobile Telecommunications Sourcing Act, and what it does. The law requires all mobile calls to be sourced to a single location, described as the end user’s “primary place of use”, a legal term of art developed especially to address the problem of multiple jurisdictions—layered and contiguous—having authority to tax a single mobile call. To ensure that the proper taxes are paid to the proper jurisdictions, the law requires the development of a database by which a provider can determine all appropriate taxes and taxing jurisdictions using the end user’s enhanced zip code or by other, similar means approved by the National Bureau of Standards. The law does not require States to develop the database; a provider may develop its own means of sourcing calls, with the caveat that the system used must be certified by the FTA, MTC and the National Bureau of Standards.
The law also contains a nonseverability clause, which provides that if any part of the law is found unconstitutional by a court of competent jurisdiction, the entire Act fails, and the taxation of mobile calls reverts to its current status.
The task force is made up of eight state government employees with technical expertise as well as expertise in public policy. The task force’s meetings are public; anyone with an interest in the matter is invited to attend and participate. Task force members are:
Melissa Lewis, CA BOE
Kevin O’Donnell, FL
Jake Hoffman, ID
Ken Lovett, IL
Terry Garber, SC
Joan Serfling, SD
Bryant Lomax, TX
Will Rice, WA
Deborah Bierbaum told the group that the entire project came about because telecommunications laws in the states were designed for wireline companies. Mobile telecommunications, by its very nature, is different, raising a host of issues. In addition, the industry began to change the way it sold the product; instead of pricing a customer’s use by the number of individual minutes (which necessarily meant that the jurisdiction(s) where the customer made the call could be ascertained), the customer was given a “bucket” of minutes for a single price. The customer could make calls from any location, but the telecommunications provider would not necessarily be able to ascertain the location of the call. The industry and the states developed the notion of “place of primary use”, which allows all calls, no matter where they are made, to be sourced to a single location. In this manner, no call escapes the proper taxation.
Once the location problem was resolved, there arose the issue of multiple, layered jurisdictions—school districts, transportation districts as well as other local taxing areas—and assigning each call to the proper jurisdiction. Industry developed the idea of using a database, based on the address of the customer’s primary place of use, that would permit a telecommunications provider to determine each taxing jurisdiction and the proper tax rates simply by the address. Pam Cooper added that the success in getting the Act through Congress proves that if states and industry work together, much can be accomplished.
Mr. Duncan noted that the work of the task force is related to other ongoing projects, and that this product might be used as a model of other efforts.
III. Purpose of the Task Force
Jason Lumia, MTC gave a more detailed description of the purpose and the work of the task force. What the task force is attempting to do is to simplify the administrative and compliance burden imposed by taxes on mobile telecommunications. The task force is charged with creating a database that providers can use to determine the appropriate taxing jurisdiction(s) and tax rates for each mobile call.
The database is supposed to map a particular street address to a particular taxing jurisdiction in states and localities. The initial question is to determine the appropriate standard to use for the database. The Act provides that any appropriate standards that the database uses has to be approved by the FTA and MTC. To make that job easier, the two organizations created the task force, and will participate via FTA and MTC staff. The law also provides that any database standard developed by the states must be approved by the ANSI XII, which is part of the old National Bureau of Standards.
Mr. Lumia noted that the task force is on a fairly tight timetable. The Act was signed into law in July 2000, and gives States until August 2002 to design and implement the database. The task force will have to work quickly to accomplish this goal.
Mr. Bucks noted that under the law, if States do not provide a database for industry to use, it can provide its own, as long as the industry-created database is based on zip-plus four or some other enhanced zip-code methodology. As for the need to obtain approval from ANSI XII, Mr. Bucks advised that this might be harder than it looks, because that group doesn’t necessarily move quickly. In addition, it will not act until the database standard is presented to them, which is the role of the FTA and MTC.
He further noted that the law also permits states to develop a database using a format similar to others used by the government, such as the FIPS 53 maintained by the Census Bureau. One of the things the task force has to decide is whether FIPS 53 is an appropriate standard to use (with a little tinkering, of course) or whether it should use some other existing standard. Mr. Bucks also told the task force that there has been state activity in this area; some states have created mechanisms for figuring the sales tax based on zip + 4. In drafting the federal law, it was decided not to require the states to create a database based on the zip + 4 standard because States were already using GIS and other more sophisticated standards. He reminded the group that states have already kept such information—addresses, etc.—for purposes of the property tax; now it is just a matter of adapting that information for transactional tax purposes.
IV. State Activity
Washington
It was noted that a GIS specialist would be joining the call at 10 AM EST; Washington will discuss its efforts at that time.
South Dakota
Joan Serfling reported that the state had worked on establishing a GIS matching system, and even sent a programmer out to Washington to evaluate what they’d developed. The were pleased with how well the system worked. When SD tried to adapt the system to their state, it didn’t work as well because so much of SD is rural. So, the state married the GIS and GPS systems. The Department sent maps to all of the cities and localities in the state, asking them to identify boundaries and street address ranges. Some cities, the larger ones especially, have very accurate maps. The smaller localities are having more difficulty. SD also found that TIGER is 100% accurate where the information is available, but if not, the system will not fill in the gaps.
Ken Lovett described the TIGER system. It is a database that describes street addresses based on street segments. Overall, the system works well, but for tax allocations, it has its shortcomings. The Census Bureau and the National Geographical Survey maintain the information in the database. The USPS uses the zip code to tie into the TIGER system. The Census Bureau will add information into the system for a fee, but their main concern is entering new information into the database, not revisiting existing information.
Terry Garber asked where the actual address was stored in the database. Mr. Lovett replied that it might be in the FE fields. Ms. Garber then asked what relates the TIGER zip + 4 to the actual street address. Mr. Lovett responded that there are actually two databases—the zip code information is in the USPS database, not TIGER.
The issue is now if TIGER presents a problem for use in rural areas, we need to find an alternative. Elliott Dubin suggested that the Census Bureau’s rural blocks might be sued, but there’s no automatice correlation between taxing jurisdictions.
Ms. Serfling noted that the Department is working with all of the cities, and had an engineering firm from North Dakota work out a system using information from QWEST to find address ranges using 911 information. There is no word on how accurate this is.
Pam Cooper noted that 911 boundaries do not always match taxing jurisdictions, so that information cannot be used without alterations.
Florida
Kevin O’Donnell reported that as part of the overall simplification effort, the state agreed to create/purchase a database for providers to use as a module for their own systems. Providers who use the module are relieved from tax liabilities resulting from informational errors. A provider may also use its own database; such a database must have a 95% accuracy as measured against the state’s database before it will be certified. Florida’s largest problem is that localities impose utility taxes on intrastate calls, and audit companies to make certain that addresses are assigned the appropriate jurisdictions. The difficulty is that local cities were taking customers whose addresses were in the county, and redesignating them as located in the city to raise revenue. The counties rely mainly on franchise taxes to raise revenue, so the practice went largely unnoticed.
Negotiations are currently underway to situs each customer in the proper taxing jurisdiction. There is much wrangling of what information is proprietary, and what is not. The state is now looking to create the database, as the law takes effect October 2001. By that time, it is hoped that the database will be in place so that the state can received feedback from its operation.
Gerald noted that his state chose a private contractor to assist with developing a database for his state; they have signed a contract with Group 1. They are contemplating a 10-12 week development schedule.
The database will provide information to the telecommunications providers; the Florida law provides that the state will certify the database once it is developed. Once the first database is certified, it will be the standard for all other databases developed. The state also anticipates providing certification to other software providers. The database will be accessible to the general public 24 hours a day, 7 days a week so that individual addresses can be matched to the appropriate taxing jurisdictions for all taxes.
It was also noted that Group 1’s product is a combination of census data and USPS data, plus that obtained from other sources. The information is considered proprietary
Illinois
Ken Lovett noted that Illinois has been using GIS for over seven years, and has mapped all of the property tax districts as well as the city, county and other district boundaries where the sales taxes will be going. The system is based on a 1-2000 foot information scale obtained from the National Geographic Survey, which was then put into their geocoding system. For tax allocation purposes though, the system is not accurate enough. For business sales tax information, a business submits paperwork to the department and receives the appropriate codes. Letters are sent to the local taxing bodies—municipalities, etc.—for verification. Therefore, using TIGER, because of its incompleteness, might not be appropriate for the database, and zip + 4 doesn’t work well for rural districts.
Washington
Washington reported that it began working with GIS technology in 1997 and realized it could be used for sales tax coding. The system developed by the Department was put online in 1999; city and county codes can be obtained through the Internet. They used ARC? Information as a primary source. They also obtained data from GDT as well as the U.S. Postal Service. Boundaries of taxing jurisdictions were coordinated using maps of cities and counties. A user enters an address and the system will tell them the appropriate tax jurisdiction and the rate. Individuals can download the database for particular cities, etc., to use in their own systems. There are 350 taxing jurisdictions in the state with about an 86% completeness ratio for each address. Sellers who use the system are held harmless for database errors.
It was also reported that several research companies have contracted with cities and counties to ensure their information in the database is correct. One tech specialist noted that GDT uses the TIGER data initially, but it has to be massaged a great deal to increase its accuracy. Even so, there are still difficulties, such as where there are a number of towns located close together, but are zip coded for Olympia. If a business uses the database, there will still be inaccuracies.
MO noted that it has contracted with Group 1 for a sales tax database design.
Jake Hoffman suggested that before it begins to look like an impossible project, the task force should remember that a wireless phone can be delivered to a rural address and the service can be hooked up, but the state or locality can’t tax the call because it doesn’t know where they are. The issues are solvable, in other words.
Terry Garber noted that South Carolina is now organizing; the larger and wealthier counties have made their GIS investment and the systems are now in place, but the smaller counties do not. Coverage of the entire state is therefore quite uneven.
Kansas reported that there is much activity in this area at the state level; they have GIS and USPS information, which is used a great deal by the revenue department.
It was noted that the database will have to deal with special districts at some point that are not coded to a city or county. In addition, a number of states are using information obtained from 3d party vendors, like Group 1. It will be important not to create a product that is incompatible with theirs.
In response to a question from Mr. Bucks, IL and WA have progressed the most in this area—both states are actually using a fully operational system. Break
V. Industry Concerns—Issues and Observations
Stacy Sprinkle, Verizon Wireless
Robert Landau
Keith Landry
(all via telephone)
Mr. Bucks recounted to representatives from the wireless industry what the task force has accomplished thus far.
Mr. Landau noted that industry will be looking for a system that will permit them to take every street address and have it coded in the database so that they can effectively bill customers. At present, some of the state systems are not adequate from a national perspective to use nationwide. The system should allow industry to take a street address and interface with the codes developed by the task force so that the provider’s billing systems can effectively assign the proper tax. Mr. Landau said that he forsees state representatives and the telecommunications billing representatives working together in the future.
Ms. Sprinkle voiced her concern that while the law was being drafted, it was discussed that the database would match boundaries, and would also provide tax rates. She queried whether the streamlined sales tax project was contemplating something different. Mr. Bucks replied that the law provides that the database would have for each street address in the state an appropriate code for each level of taxing jurisdiction. Once the jurisdiction is known, the tax rate is just an additional piece. The assumption was that the rate was simply a part of the information that identifies the taxing jurisdiction.
Ms. Cook noted that Florida’s database will provide the rate; Ms. Bierbaum said that providing the rate is important, as the providers can’t always obtain the information, especially from local jurisdictions.
Mr. Bucks reiterated that it was always contemplated by the states that rate tables would be provided, even though the law does not require states to do so. It doesn’t make a sense to map all of the taxing jurisdictions and then not provide the tax rates. But everyone needs to understand that the hold harmless provisions do not apply to the rates.
Mr. Duncan asked the wireless representatives whether they will form a group of tax and systems personnel as a counterpart to the task force. The industry responded that they need information from the task force on what it’s doing before they can convene such a group.
Ms. Bierbaum pointed out that the database is being creating under the mobile sourcing act, and queried how it interacts with the streamlined project, and whether wireline companies will be able to use the information also. She noted that there is no legal requirement for the state to do so, and also questioned whether there were any differences in the utility of the information that will be provided.
The wireless representatives replied that the important thing is to situs the street addresses and the code that represents the taxing jurisdiction. Mr. Bucks noted that each state would have to make the decision whether to extend the use of the database to other industries, but that it was his understanding that the GIS systems are currently being used in a more expanded capacity. It wouldn’t make sense, he said, to use it for wireless and other tax purposes, but not for the wireline companies.
Ms. Garber suggested that in the interest of streamlining this process, it would make sense to limit our attention to the wireless industry. Otherwise, the process will have to be opened up to credit card companies, etc., and would become a much larger project.
Mr. Nicely noted his concern that the place of primary use might be different for a wireless provider than for a wireline provider. Mr. Bucks noted that this is an important point, but the assignation of a rate(s) to an address will be the same regardless of what legal rules are used to source the call. States are interested in getting the database information right the first time because they want the proper tax collected.
Ms. Bierbaum noted that the industry has incentives too, because it faces class action lawsuits. If the companies collect too much tax, the customers sue, and if they don’t collect enough, the states sue. Accuracy is important. Ms. Sprinkle pointed out that the task force should be sensitive to the fact that between the streamlined system and the wireless system, the wireless industry is going to bear the brunt of the costs. They do not want to be the guinea pigs for other models, and it also doesn’t want to be required to use two different databases at the same time to comply with different taxes. The wireless industry should also not be held to a different standard than other industries.
VI. FIPS
Elliott Dubin described FIPS, which stands for Federal Information Processing System. It was designed specifically for federal purposes, not state and local. But it can be adapted to match the boundaries of political jurisdictions, and make those into FIPS codes. Once of FIPS first uses was to tell Congress how much federal funds should be returned to each congressional district. The revenue sharing programs also used many of the FIPS boundaries to track federal grants to local governments. In many of these cases, the tracking occurred to make certain that the funds didn’t go to special districts, but to the general government. So, the census tract data was used to build Minor Civil Divisions.
FIPS is very accurate in cities, etc., but falls short in rural and unincorporated areas. Even so, FIPS gives individual codes for states, counties and minor civil divisions that have taxing power—schools, fire, hospital, mosquito abatement districts, etc. Each of these has a unique code. The reason why there isn’t a code to deal with taxing districts for purposes of wireless communications is because no one has paid the Census Bureau to create it..
FIPS is not accurate in the rural and unincorporated areas because to input this information would have been too expensive. Information for rural governments is accurate only when the census of government is taken. After that, the accuracy of the information deteriorates.
Mr. Dubin also noted that whether anything needs to be added to FIPS depends on how accurate the database needs to be. If there are separate districts that are different from the general government, they can be separated out, but we would have to pay the Census Bureau to do it for us. But the information can be nested.
FIPS now tracks the following districts: property, sales, income taxes at the state and local level in the following manner:
State: 2 digit code (USPS method)
3 digit county code
Codes for MCDs
Codes for special districts, etc.
The longest code is 9 digits.
Mr. Bucks asked what information the Census Bureau regularly maintains. Mr. Dubin replied that it maintains information down to the school district level. The other special districts probably aren’t maintained except when they are included with the general government.
VII. Other Systems and Standards
Mr. Hoffman opined that the TIGER-zip combination is intriguing as it takes pieces from the one and combines it with information from the USPS. It could get pretty detailed—it’s worth taking a look at and see if it can be adapted to our needs..
It was also noted the task force needs to define standards and create an approval process for certification.
Ms. Garber reported that the ANSI X12 accredited standards committee is divided into subcommittees roughly along industry lines. There is a government subcommittee responsible for standards related to the use between governments or private and public sectors. The subcommittee is divided further into subgroups, including the tax interchange group, which will review implementation guidelines. The tax information task group is responsible for X12 standards related to tax and revenue reporting; Ms Garber advised that she chairs this group..
Ms. Garber noted that the purview of X12 standards doesn’t include applications. It is only concerned with code lists, data format, etc. It wouldn’t matter to them that a particular format they developed wouldn’t work well with the wireless industry.
ANSI looks for whether the codes, formats, etc. are useable, updatable, etc. and who will maintain the code lists. Regardless of what is put in place, the task force will need to discuss the custodian for these lists, so someone needing information can obtain the latest version.
She also said that if this group creates a data format that can be used to exchange information, it can be approved by ANSI, too.
Ms. Garber then described the approval process. The process is from the bottom up; i.e., the standard to be considered must come up through the subcommittees. Ms. Garber volunteered the tax information group as the starting point. The merits of the tax information group is that numerous state representatives serve in it, and the meetings are open to government as well as the private sector. Once out the tax information group, the proposed standard is reviewed by the government subcommittee. If approved, the standard will be sent to a technical assessment committee, which is more like a peer review. Here, the standard will be scrutinized to determine whether it is reasonable, maintainable, etc. Then the proposed standard is put to a vote by the X12 group, comprised of about 1,000 members. If approved, the proposal will become a standard, usually coinciding with the calendar year.
With respect to the code lists, a question was raised as to whether these lists will be generic, or whether they will be maintained by each state. Ms. Garber replied that the system will be tiered, and gave as an example a new vendor of wireless services. The vendor must be able to use the database structure. The vendor goes to ANSI, who directs it to the MTC. The MTC then advises the vendor that if it wants the database information for a particular region, then it needs to contact x, y or z.
Mr. Bucks asked how one becomes a member of the government subcommittee. Ms. Garber replied that it is really by attendance, but preference is given to members who are a part of ANSI X12, which is itself a membership organization. The next ANSI meeting is scheduled for the first week of June 2001 in St. Louis, MO; the subcommittees meet according to their own schedule.
A number of suggestions to move the task force’s work along were made:
A. Organization
The task force should have two co-chairs, selected by the FTA and MTC. The executive directors from each organization and the FTA President and MTC Chair will make the selections. This should be done before the next meeting.
B. Content
The task force needs to procure more specific information about FIPS and other national standards before the next meeting. The task force should survey and gather information from all states doing database work and get the data formats they are working with. The task force will not be responsible for the quality of the data, but developing format, though the two are not necessarily exclusive from one another.
C. Communication
The task force needs to communicate with and notify ANSI X12 that the FTA and MTC have begun their work under the Mobile Telecommunications Sourcing Act, through the formation of the task force. The task force will develop the standard for use in the database.
D. Work Schedule
One approach is to take volunteers who want to work on a detailed work schedule; this can be assigned to the co-chairs and to any other task force members.
E. Next Meeting
It was noted that travel budgets are tight in the states, and that meetings can initially be carried out via teleconference. The task force will meet physically only when needed. The second meeting will be scheduled within a month; in the event a physical meeting is needed, there are a number of other meetings occurring where a task force meeting can be appended.
Mr. Maxwell queried Mr. Bucks on the assumption that the MTC would nominate Will Rice as a co-chair. Mr. Bucks responded that he would like to confer with Mr. Rice on the process and that he is one of the candidates, but that there were others, too. He further noted that another task force meeting could be appended to the FTA conference in Seattle at the end of May.
Mr. Duncan suggested that gathering information on what people in the states are already doing is a good start. He will also circulate information prepared by Group 1 at the streamlined meeting, where they laid out a coding system based on FIPS that handles the special districts using an alpha code.
Mr. Bucks noted that one reason to consider a physical meeting in the near future is that the group has not heard about possible solutions from Group 1 and other private vendors. The task force can meet either in Milwaukee, WI on May 7th or 8th, in conjunction with the streamlined meeting, or it can meet later that month in Seattle, with a teleconference in between.
A consensus of task force members decided that meetings will be held by teleconference until it is necessary to physically meet again.
Assignments
Mr. Dubin with compile information on FIPS
Ms. Garber will draft a communication to ANSI X12 regarding the task force’s work.
Mr. Lyon and Mr. Lumia will circulate requests for database information from the states.
A teleconference is tentatively scheduled for April 19, 2001 at 1 PM EDT.
Mr. Bucks reminded everyone that the meetings of the task force are public, open to states not serving on the group as well as industry. This includes physical meetings, too.
Ms. Bierbaum pointed out that there are more vendors that Group 1 with systems, and they are not all the same. She suggested that states review all of the systems extant, because industry doesn’t want to be locked into buying from one vendor and paying too much.
It was decided that states and industry should advise Mr. Lumia of the relevant vendors, the formats they are using and the ideas that are being developed.
The meeting was adjourned.