STATE OF OKLAHOMA

1st Session of the 54th Legislature (2013)

HOUSE BILL 2239	By:	Dorman

AS INTRODUCED

An Act relating to revenue and taxation; amending 68 O.S. 2011, Section 3603, as amended by Section 1, Chapter 310, O.S.L. 2012 (68 O.S. Supp. 2012, Section 3603), which relates to the Oklahoma Quality Jobs Program Act; modifying definition; providing for qualification of remanufacturing activity; amending 68 O.S. 2011, Section 1352, which relates to the Oklahoma Sales Tax Code; modifying definitions; providing for sales tax exemption based on certain remanufacturing activity; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1.     AMENDATORY     68 O.S. 2011, Section 3603, as amended by Section 1, Chapter 310, O.S.L. 2012 (68 O.S. Supp. 2012, Section 3603), is amended to read as follows:
Section 3603.  A.  As used in Section 3601 et seq. of this title:
1.	a.	“Basic industry” means:
(1)	those manufacturing activities defined or classified in the NAICS Manual under Industry Sector Nos. 31, 32 and 33, Industry Group No. 5111 or Industry No. 11331, and remanufacturing activity, whether or not described in the NAICS Manual,
(2)	those electric power generation, transmission and distribution activities defined or classified in the NAICS Manual under U.S. Industry Nos. 221111 through 221122, if:
(a)	an establishment engaged therein qualifies as an exempt wholesale generator as defined by 15 U.S.C., Section 79z-5a,
(b)	the exempt wholesale generator facility consumes from sources located within the state at least ninety percent (90%) of the total energy used to produce the electrical output which qualifies for the specialized treatment provided by the Energy Policy Act of 1992, P.L. 102-486, 106 Stat. 2776, as amended, and federal regulations adopted pursuant thereto,
(c)	the exempt wholesale generator facility sells to purchasers located outside the state for consumption in activities located outside the state at least ninety percent (90%) of the total electrical energy output which qualifies for the specialized treatment provided by the Energy Policy Act of 1992, P.L. 102-486, 106 Stat. 2776, as amended, and federal regulations adopted pursuant thereto, and
(d)	the facility is constructed on or after July 1, 1996,
(3)	those administrative and facilities support service activities defined or classified in the NAICS Manual under Industry Group Nos. 5611 and 5612, Industry Nos. 51821, 519130, 52232, 56142 and 54191 or U.S. Industry Nos. 524291 and 551114, those other support activities for air transportation defined or classified in the NAICS Manual under Industry Group No. 488190, and those support, repair, and maintenance service activities for the wind industry defined or classified in the NAICS Manual under Industry Group No. 811310,
(4)	those professional, scientific and technical service activities defined or classified in the NAICS Manual under U.S. Industry Nos. 541710 and 541380,
(5)	distribution centers for retail or wholesale businesses defined or classified in the NAICS Manual under Sector No. 42, if forty percent (40%) or more of the inventory processed through such warehouse is shipped out-of-state,
(6)	those adjustment and collection service activities defined or classified in the NAICS Manual under U.S. Industry No. 561440, if seventy-five percent (75%) of the loans to be serviced were made by out-of-state debtors,
(7)	(a)	those air transportation activities defined or classified in the NAICS Manual under Industry Group No. 4811, if the following facilities are located in this state:
(i)	the corporate headquarters of an establishment classified therein, and
(ii)	a facility or facilities at which reservations for transportation provided by such an establishment are processed, whether such services are performed by employees of the establishment, by employees of a subsidiary of or other entity affiliated with the establishment or by employees of an entity with whom the establishment has contracted for the performance of such services; provided, this provision shall not disqualify an establishment which uses an out-of-state entity or employees for some reservations services, or
(b)	those air transportation activities defined or classified in the NAICS Manual under Industry Group No. 4811, if an establishment classified therein has or will have within one (1) year sales of at least seventy-five percent (75%) of its total sales, as determined by the Incentive Approval Committee pursuant to the provisions of subsection B of this section, to out-of-state customers or buyers, to in-state customers or buyers if the product or service is resold by the purchaser to an out-of-state customer or buyer for ultimate use, or to the federal government,
(8)	flight training services activities defined or classified in the NAICS Manual under U.S. Industry Group No. 611512, which for purposes of Section 3601 et seq. of this title shall include new direct jobs for which gross payroll existed on or after January 1, 2003, as identified in the NAICS Manual,
(9)	the following, if an establishment classified therein has or will have within one (1) year sales of at least seventy-five percent (75%) of its total sales, as determined by the Incentive Approval Committee pursuant to the provisions of subsection B of this section, to out-of-state customers or buyers, to in-state customers or buyers if the product or service is resold by the purchaser to an out-of-state customer or buyer for ultimate use, or to the federal government:
(a)	those transportation and warehousing activities defined or classified in the NAICS Manual under Industry Subsector No. 493, if not otherwise listed in this paragraph, Industry Subsector No. 484 and Industry Group Nos. 4884 through 4889,
(b)	those passenger transportation activities defined or classified in the NAICS Manual under Industry Nos. 561510, 561520 and 561599,
(c)	those freight or cargo transportation activities defined or classified in the NAICS Manual under Industry No. 541614,
(d)	those insurance activities defined or classified in the NAICS Manual under Industry Group No. 5241,
(e)	those mailing, reproduction, commercial art and photography and stenographic service activities defined or classified in the NAICS Manual under U.S. Industry Nos. 541430, 541860, 541922, 561439 and 561492,
(f)	those services to dwellings and other buildings, as defined or classified in the NAICS Manual under Industry Group No. 5617, excluding U.S. Industry No. 561730,
(g)	those equipment rental and leasing activities defined or classified in the NAICS Manual under Industry Group Nos. 5323 and 5324,
(h)	those employment services defined or classified in the NAICS Manual under Industry Group No. 5613,
(i)	those information technology and other computer-related service activities defined or classified in the NAICS Manual under Industry Group Nos. 5112, 5182, 5191 and 5415,
(j)	those business support service activities defined or classified in the NAICS Manual under U.S. Industry Nos. 561410 through 561439, Industry Group No. 5616 and Industry No. 51911,
(k)	those medical and diagnostic laboratory activities defined or classified in the NAICS Manual under Industry Group No. 6215,
(l)	those professional, scientific and technical service activities defined or classified in the NAICS Manual under Industry Group Nos. 5412, 5414, 5415, 5416 and 5417, Industry Nos. 54131, 54133, 54136, 54137 and 54182, and U.S. Industry No. 541990, if not otherwise listed in this paragraph,
(m)	those communication service activities defined or classified in the NAICS Manual under Industry Nos. 51741 and 51791,
(n)	those refuse systems activities defined or classified in the NAICS Manual under Industry Group No. 5622, provided that the establishment is primarily engaged in the capture and distribution of methane gas produced within a landfill,
(o)	general wholesale distribution of groceries, defined or classified in the NAICS Manual under Industry Group Nos. 4244 and 4245,
(p)	those activities relating to processing of insurance claims, defined or classified in the NAICS Manual under U.S. Industry Nos. 524210 and 524292; provided, activities described in U.S. Industry Nos. 524210 and 524292 in the NAICS Manual other than processing of insurance claims shall not be included for purposes of this subdivision,
(q)	those agricultural activities classified in the NAICS Manual under U.S. Industry Nos. 112120 and 112310,
(r)	those professional organization activities classified in the NAICS Manual under U.S. Industry No. 813920,
(s)	alternative energy structure construction classified in the NAICS Manual under U.S. Industry No. 237130,
(t)	solar reflective coating application classified in the NAICS Manual under U.S. Industry No. 238160, and
(u)	solar heating equipment installation classified in the NAICS Manual under U.S. Industry No. 238220;
(10)	those activities related to extraction of crude petroleum and natural gas defined or classified in the NAICS Manual under Industry Group No. 2111 or 213111, subject to the limitations provided in paragraph 3 of this subsection and paragraph 3 of subsection B of this section,
(11)	those activities performed by the federal civilian workforce at a facility of the Federal Aviation Administration located in this state if the Director of the Department of Commerce determines or is notified that the federal government is soliciting proposals or otherwise inviting states to compete for additional federal civilian employment or expansion of federal civilian employment at such facilities,
(12)	those activities defined or classified in the NAICS Manual under U.S. Industry No. 711211 (2007 version),
(13)	those real estate or brokerage activities classified in the NAICS Manual under U.S. Industry No. 53120 for which at least seventy-five percent (75%) of the establishment’s revenues are attributed to out-of-state sales and at least seventy-five percent (75%) of the real estate transactions generating those revenues are attributed to real property located outside the State of Oklahoma, or
(14)	those support activities for rail transportation and those support activities for water transportation defined or classified in the NAICS Manual under U.S. Industry Nos. 4882 and 4883.
b.	An establishment described in subparagraph a of this paragraph shall not be considered to be engaged in a basic industry unless it offers, or will offer within one hundred eighty (180) days of employment, a basic health benefits plan to the individuals it employs in new direct jobs in this state which is determined by the Oklahoma Department of Commerce to consist of the following elements or elements substantially equivalent thereto:
(1)	not more than fifty percent (50%) of the premium shall be paid by the employee,
(2)	coverage for basic hospital care,
(3)	coverage for physician care,
(4)	coverage for mental health care,
(5)	coverage for substance abuse treatment,
(6)	coverage for prescription drugs, and
(7)	coverage for prenatal care;
2.  “Change in control event” means the transfer to one or more unrelated establishments or unrelated persons, of either:
a.	beneficial ownership of more than fifty percent (50%) in value and more than fifty percent (50%) in voting power of the outstanding equity securities of the transferred establishment, or
b.	more than fifty percent (50%) in value of the assets of an establishment.
A transferor shall be treated as related to a transferee if more than fifty percent (50%) of the voting interests of the transferor and transferee are owned, directly or indirectly, by the other or are owned, directly or indirectly, by the same person or persons, unless such transferred establishment has an outstanding class of equity securities registered under Sections 12(b) or 15(d) of the Securities Exchange Act of 1934, as amended, in which event the transferor and transferee will be treated as unrelated; provided, an establishment applying for the Oklahoma Quality Jobs Program Act as a result of a change of control event is required to apply within one hundred eighty (180) days of the change in control event to qualify for consideration.  An establishment entering the Oklahoma Quality Jobs Program Act as the result of a change of control event shall be required to maintain a level of new direct jobs as agreed to in its contract with the Department of Commerce and to pay new direct jobs an average annualized wage which equals or exceeds one hundred twenty-five percent (125%) of the average county wage as that percentage is determined by the Oklahoma State Data Center based upon the most recent U.S. Department of Commerce data for the county in which the new jobs are located.  For purposes of this paragraph, healthcare premiums paid by the applicant for individuals in new direct jobs shall not be included in the annualized wage.  Such establishment entering the Quality Jobs Program Act as the result of a change of control event shall be required to retain the contracted average annualized wage and maintain the contracted maintenance level of new direct jobs numbers as certified by the Tax Commission.  If the required average annualized wage or the required new direct jobs numbers do not equal or exceed such contracted level during any quarter, the quarterly incentive payments shall not be made and shall not be resumed until such time as such requirements are met.  An establishment described in this paragraph shall be required to repay all incentive payments received under the Quality Jobs Program Act if the establishment is determined by the Oklahoma Tax Commission to no longer have business operations in the state within three (3) years from the beginning of the calendar quarter for which the first incentive payment claim is filed.
3.  “New direct job”:
a.	means full-time-equivalent employment in this state in an establishment which has qualified to receive an incentive payment pursuant to the provisions of Section 3601 et seq. of this title which employment did not exist in this state prior to the date of approval by the Department of the application of the establishment pursuant to the provisions of Section 3604 of this title and with respect to an establishment qualifying for incentive payments pursuant to division (12) of subparagraph a of paragraph 1 of this subsection shall not include compensation paid to an employee or independent contractor for an athletic contest conducted in the state if the compensation is paid by an entity that does not have its principal place of business in the state or that does not own real or personal property having a market value of at least One Million Dollars ($1,000,000.00) located in the state, and the employees or independent contractors of such entity are compensated to compete against the employees or independent contractors of an establishment that qualifies for incentive payments pursuant to division (12) of subparagraph a of paragraph 1 of this subsection and which is organized under Oklahoma law or that is lawfully registered to do business in the state and which does have its principal place of business located in the state and owns real or personal property having a market value of at least One Million Dollars ($1,000,000.00) located in the state; provided, that if an application of an establishment is approved by the Department of Commerce after a change in control event and the Director of the Department of Commerce determines that the jobs located at such establishment are likely to leave the state, “new direct job” shall include employment that existed in this state prior to the date of application which is retained in this state by the new establishment following a change in control event, if such job otherwise qualifies as a new direct job, and
b.	shall include full-time-equivalent employment in this state of employees who are employed by an employment agency or similar entity other than the establishment which has qualified to receive an incentive payment and who are leased or otherwise provided under contract to the qualified establishment, if such job did not exist in this state prior to the date of approval by the Department of the application of the establishment or the job otherwise qualifies as a new direct job following a change in control event.  A job shall be deemed to exist in this state prior to approval of an application if the activities and functions for which the particular job exists have been ongoing at any time within six (6) months prior to such approval.  With respect to establishments defined in division (10) of subparagraph a of paragraph 1 of this subsection, new direct jobs shall be limited to those jobs directly comprising the corporate headquarters of or directly relating to manufacturing, maintenance, administrative, financial, engineering, surveying, geological or geophysical services performed by the establishment.  Under no circumstances shall employment relating to field services be considered new direct jobs;
4.  “Estimated direct state benefits” means the tax revenues projected by the Department to accrue to the state as a result of new direct jobs;
5.  “Estimated direct state costs” means the costs projected by the Department to accrue to the state as a result of new direct jobs.  Such costs shall include, but not be limited to:
a.	the costs of education of new state resident children,
b.	the costs of public health, public safety and transportation services to be provided to new state residents,
c.	the costs of other state services to be provided to new state residents, and
d.	the costs of other state services;
6.  “Estimated net direct state benefits” means the estimated direct state benefits less the estimated direct state costs;
7.  “Net benefit rate” means the estimated net direct state benefits computed as a percentage of gross payroll; provided:
a.	except as otherwise provided in this paragraph, the net benefit rate may be variable and shall not exceed five percent (5%),
b.	the net benefit rate shall not exceed six percent (6%) in connection with an establishment which is owned and operated by an entity which has been awarded a United States Department of Defense contract for which:
(1)	bids were solicited and accepted by the United States Department of Defense from facilities located outside this state,
(2)	the term is or is renewable for not less than twenty (20) years, and
(3)	the average annual salary, excluding benefits which are not subject to Oklahoma income taxes, for new direct jobs created as a direct result of the awarding of the contract is projected by the Department of Commerce to equal or exceed Forty Thousand Dollars ($40,000.00) within three (3) years of the date of the first incentive payment,
c.	except as otherwise provided in subparagraph d of this paragraph, in no event shall incentive payments, cumulatively, exceed the estimated net direct state benefits,
d.	the net benefit rate shall be five percent (5%) for an establishment locating:
(1)	in an opportunity zone located in a high-employment county, as such terms are defined in subsection G of Section 3604 of this title, or
(2)	in a county in which:
(a)	the per capita personal income, as determined by the Department, is eighty-five percent (85%) or less of the statewide average per capita personal income,
(b)	the population has decreased over the previous ten (10) years, as determined by the State Data Center based on the most recent U.S. Department of Commerce data, or
(c)	the unemployment rate exceeds the lesser of five percent (5%) or two percentage points above the state average unemployment rate as certified by the Oklahoma Employment Security Commission,
e.	the net benefit rate shall not exceed six percent (6%) in connection with an establishment which:
(1)	is, as of the date of application, receiving incentive payments pursuant to the Oklahoma Quality Jobs Program Act and has been receiving such payments for at least one (1) year prior to the date of application, and
(2)	expands its operations in this state by creating additional new direct jobs which pay average annualized wages which equal or exceed one hundred fifty percent (150%) of the average annualized wages of new direct jobs on which incentive payments were received during the preceding calendar year, and
f.	with respect to an establishment defined or classified in the NAICS Manual under U.S. Industry No. 711211 (2007 version) or any establishment defined or classified in the NAICS Manual as a U.S. Industry Number which is not included within the definition of “basic industry” as such term is defined in this section on April 17, 2008, the net benefit rate shall not exceed the highest rate of income tax imposed upon the Oklahoma taxable income of individuals pursuant to subparagraph (g) or subparagraph (h), as applicable, of paragraph 1 and paragraph 2 of subsection B of Section 2355 of this title.  Any change in such highest rate of individual income tax imposed pursuant to the provisions of Section 2355 of this title shall be applicable to the computation of incentive payments to an establishment as described by this subparagraph and shall be effective for purposes of incentive payments based on payroll paid by such establishment on or after January 1 of any applicable year for which the net benefit rate is modified as required by this subparagraph.
Incentive payments made pursuant to the provisions of this subparagraph shall be based upon payroll associated with such new direct jobs.  For purposes of this subparagraph, the amount of health insurance premiums or other benefits paid by the establishment shall not be included for purposes of computation of the average annualized wage;
8.  “Gross payroll” means wages, as defined in Section 2385.1 of this title for new direct jobs;
9.	a.	“Establishment” means any business or governmental entity, no matter what legal form, including, but not limited to, a sole proprietorship; partnership; limited liability company; corporation or combination of corporations which have a central parent corporation which makes corporate management decisions such as those involving consolidation, acquisition, merger or expansion; federal agency; political subdivision of the State of Oklahoma; or trust authority; provided, distinct, identifiable subunits of such entities may be determined to be an establishment, for all purposes of Section 3601 et seq. of this title, by the Department subject to the following conditions:
(1)	within three (3) years of the first complete calendar quarter following the start date, the entity must have a minimum payroll of Two Million Five Hundred Thousand Dollars ($2,500,000.00) and the subunit must also have or will have a minimum payroll of Two Million Five Hundred Thousand Dollars ($2,500,000.00),
(2)	the subunit is engaged in an activity or service or produces a product which is demonstratively independent and separate from the entity’s other activities, services or products and could be conducted or produced in the absence of any other activity, service or production of the entity,
(3)	has an accounting system capable of tracking or facilitating an audit of the subunit’s payroll, expenses, revenue and production.  Limited interunit overlap of administrative and purchasing functions shall not disqualify a subunit from consideration as an establishment by the Department,
(4)	the entity has not previously had a subunit determined to be an establishment pursuant to this section; provided, the restriction set forth in this division shall not apply to subunits which qualify pursuant to the provisions of subparagraph b of paragraph 7 of this subsection, and
(5)	it is determined by the Department that the entity will have a probable net gain in total employment within the incentive period.
b.	The Department may promulgate rules to further limit the circumstances under which a subunit may be considered an establishment.  The Department shall promulgate rules to determine whether a subunit of an entity achieves a net gain in total employment.  The Department shall establish criteria for determining the period of time within which such gain must be demonstrated and a method for determining net gain in total employment;
10.  “NAICS Manual” means any manual, book or other publication containing the North American Industry Classification System, United States, 1997, promulgated by the Office of Management and Budget of the United States of America, or the latest revised edition;
11.  “Qualified federal contract” means a contract between an agency or instrumentality of the United States government, including but not limited to the Department of Defense or any branch of the United States Armed Forces, but exclusive of any contract performed for the Federal Emergency Management Agency as a direct result of a natural disaster declared by the Governor or the President of the United States with respect to damage to property located in Oklahoma or loss of life or personal injury to persons in Oklahoma, and a lawfully recognized business entity, whether or not the business entity is organized under the laws of the State of Oklahoma or whether or not the principal place of business of the business entity is located within the State of Oklahoma, for the performance of services, including but not limited to testing, research, development, consulting or other services in a basic industry, if the contract involves the performance of such services performed on or after July 1, 2009, by the employees of the business entity within the State of Oklahoma or if the contract involves the performance of such services performed on or after July 1, 2009, by employees of a lawfully recognized business entity that is a subcontractor of the business entity with which the prime contract has been formed.  A qualified federal contract described in this paragraph shall not qualify unless both the qualified federal contractor and any subcontractors originally involved in the work or added subsequently during the period of performance verify to the qualified federal contractor verifier that it offers, or will offer within one hundred eighty (180) days of employment of its respective employees, a basic health benefits plan as described in subparagraph b of paragraph 1 of this subsection to individuals who perform qualified labor hours in this state;
12.  “Qualified federal contractor verifier” means a nonprofit entity organized under the laws of the State of Oklahoma, having an affiliation with a comprehensive university which is part of The Oklahoma State System of Higher Education, and having the following characteristics:
a.	established multiyear classified and unclassified indefinite-delivery/indefinite-quantity federal contract vehicles in excess of Fifty Million Dollars ($50,000,000.00),
b.	current capability to sponsor and maintain personnel security clearances and authorized by the federal government to handle and perform classified work up to the Top Secret Sensitive Compartmented Information levels,
c.	at least one on-site federally certified Sensitive Compartmented Information Facility,
d.	on-site secure mass data storage complex with the capability of isolating, segregating and protecting corporate proprietary and classified information,
e.	trusted agent status by maintaining no ownership of, vested interest in, nor royalty production from any intellectual property,
f.	at least one hundred thousand (100,000) square feet of configurable laboratory and support space,
g.	the direct access to restricted air space through a formalized memorandum of agreement with the Department of Defense,
h.	at least five thousand (5,000) acres available for outdoor testing and training facilities, and
i.	the ability to house state-of-the-art surety facilities, including chemical, biological, radiological, explosives, electronics, and unmanned systems laboratories and ranges;
13.  “SIC Manual” means the 1987 revision to the Standard Industrial Classification Manual, promulgated by the Office of Management and Budget of the United States of America;
14.  “Start date” means the date on which an establishment may begin accruing benefits for the creation of new direct jobs, which date shall be determined by the Department;
15.  “Effective date” means the date of approval of a contract under which incentive payments will be made pursuant to the Oklahoma Quality Jobs Program Act, which shall be the date the signed and accepted incentive contract is received by the Department; provided, an approved project may have a start date which is different from the effective date;
16.  “Total qualified labor hours” means the reimbursed payment amount for hours of work performed by the State of Oklahoma workforce of a qualified federal contractor or the State of Oklahoma workforce of a subcontractor of a qualified federal contractor and which are required for the full performance of a qualified federal contract;
17.  “Qualified labor rate” means the fully reimbursed labor rate paid through a qualified federal contract for qualified labor hours to the qualified federal contractor or subcontractor; and
18.  “Qualified federal contractor” means a business entity:
a.	maintaining a prime contract with the federal government as defined in paragraph 11 of this subsection,
b.	providing notice of intent to apply to the Department within one hundred eighty (180) days of the effective date of this act or one hundred eighty (180) days of the date of the award of a qualified federal contract or award of a new qualified subcontract under an existing qualified federal contract, and
c.	adding substantively to the contract by performing at least eight percent (8%) of the total labor whether qualified and nonqualified labor as determined by the federal contractor verifier on a direct contract or individual task order or delivery order on an indefinite-delivery/indefinite-quantity or other blanket contract vehicle.
Should a prime contractor provide notice to the Department of its intent not to apply for incentive for a qualified federal contract or fails to qualify under the criteria above, subcontractors in order of tier ranking as determined by the federal contract verifier may assume the role of the prime and apply to become a qualified federal contractor provided the entity meets the same criteria above with the exception that notice of intent to apply with the Department must be provided within sixty (60) days of the prime’s disqualification or one hundred eighty (180) days of the award of its subcontract, whichever is later.
B.  The Incentive Approval Committee is hereby created and shall consist of the Director of the Office of State Finance, the Director of the Department and one member of the Oklahoma Tax Commission appointed by the Tax Commission, or a designee from each agency approved by such member.  It shall be the duty of the Committee to determine:
1.  Upon initial application on a form approved by the Committee, if an establishment is engaged in a basic industry as defined in subdivision (b) of division (7) or in subdivisions (a) through (p) of division (9) of subparagraph a of paragraph 1 of subsection A of this section or as otherwise provided by subsection C of this section;
2.  If an establishment would have been defined as a “basic industry” prior to the amendments to this section to convert from SIC Codes to NAICS Codes.  If the Committee so determines, the establishment shall be considered as a “basic industry” for purposes of the Oklahoma Quality Jobs Program Act; and
3.  If employees of an establishment as defined in division (10) of subparagraph a of paragraph 1 of subsection A of this section meet the requirements to be considered employed in new direct jobs as specified in paragraph 3 of subsection A of this section.
C.  For an establishment defined as a “basic industry” pursuant to division (4) of subparagraph a of paragraph 1 of subsection A of this section, the Incentive Approval Committee shall consist of the members provided by subsection B of this section and the Executive Director of the Oklahoma Center for the Advancement of Science and Technology, or a designee from the Center appointed by the Executive Director.
SECTION 2.     AMENDATORY     68 O.S. 2011, Section 1352, is amended to read as follows:
Section 1352.  As used in the Oklahoma Sales Tax Code:
1.  “Bundled transaction” means the retail sale of two or more products, except real property and services to real property, where the products are otherwise distinct and identifiable, and the products are sold for one nonitemized price.  A “bundled transaction” does not include the sale of any products in which the sales price varies, or is negotiable, based on the selection by the purchaser of the products included in the transaction.  As used in this paragraph:
a.	“distinct and identifiable products” does not include:
(1)	packaging such as containers, boxes, sacks, bags, and bottles, or other materials such as wrapping, labels, tags, and instruction guides, that accompany the retail sale of the products and are incidental or immaterial to the retail sale thereof, including but not limited to, grocery sacks, shoeboxes, dry cleaning garment bags and express delivery envelopes and boxes,
(2)	a product provided free of charge with the required purchase of another product.  A product is provided free of charge if the sales price of the product purchased does not vary depending on the inclusion of the product provided free of charge, or
(3)	items included in the definition of gross receipts or sales price, pursuant to this section,
b.	“one nonitemized price” does not include a price that is separately identified by product on binding sales or other supporting sales-related documentation made available to the customer in paper or electronic form including, but not limited to an invoice, bill of sale, receipt, contract, service agreement, lease agreement, periodic notice of rates and services, rate card, or price list,
A transaction that otherwise meets the definition of a bundled transaction shall not be considered a bundled transaction if it is:
(1)	the retail sale of tangible personal property and a service where the tangible personal property is essential to the use of the service, and is provided exclusively in connection with the service, and the true object of the transaction is the service,
(2)	the retail sale of services where one service is provided that is essential to the use or receipt of a second service and the first service is provided exclusively in connection with the second service and the true object of the transaction is the second service, or
(3)	a transaction that includes taxable products and nontaxable products and the purchase price or sales price of the taxable products is de minimis.  For purposes of this subdivision, “de minimis” means the seller’s purchase price or sales price of taxable products is ten percent (10%) or less of the total purchase price or sales price of the bundled products.  Sellers shall use either the purchase price or the sales price of the products to determine if the taxable products are de minimis.  Sellers may not use a combination of the purchase price and sales price of the products to determine if the taxable products are de minimis.  Sellers shall use the full term of a service contract to determine if the taxable products are de minimis, or
(4)	the retail sale of exempt tangible personal property and taxable tangible personal property where:
(a)	the transaction includes food and food ingredients, drugs, durable medical equipment, mobility enhancing equipment, over-the-counter drugs, prosthetic devices or medical supplies, and
(b)	the seller’s purchase price or sales price of the taxable tangible personal property is fifty percent (50%) or less of the total purchase price or sales price of the bundled tangible personal property.  Sellers may not use a combination of the purchase price and sales price of the tangible personal property when making the fifty percent (50%) determination for a transaction;
2.  “Business” means any activity engaged in or caused to be engaged in by any person with the object of gain, benefit, or advantage, either direct or indirect;
3.  “Commission” or “Tax Commission” means the Oklahoma Tax Commission;
4.  “Computer” means an electronic device that accepts information in digital or similar form and manipulates it for a result based on a sequence of instructions;
5.  “Computer software” means a set of coded instructions designed to cause a “computer” or automatic data processing equipment to perform a task;
6.  “Consumer” or “user” means a person to whom a taxable sale of tangible personal property is made or to whom a taxable service is furnished.  “Consumer” or “user” includes all contractors to whom a taxable sale of materials, supplies, equipment, or other tangible personal property is made or to whom a taxable service is furnished to be used or consumed in the performance of any contract;
7.  “Contractor” means any person who performs any improvement upon real property and who, as a necessary and incidental part of performing such improvement, incorporates tangible personal property belonging to or purchased by the person into the real property being improved;
8.  “Drug” means a compound, substance or preparation, and any component of a compound, substance or preparation:
a.	recognized in the official United States Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States, or official National Formulary, and supplement to any of them,
b.	intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease, or
c.	intended to affect the structure or any function of the body;
9.  “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities;
10.  “Established place of business” means the location at which any person regularly engages in, conducts, or operates a business in a continuous manner for any length of time, that is open to the public during the hours customary to such business, in which a stock of merchandise for resale is maintained, and which is not exempted by law from attachment, execution, or other species of forced sale barring any satisfaction of any delinquent tax liability accrued under the Oklahoma Sales Tax Code;
11.  “Fair authority” means:
a.	any county, municipality, school district, public trust or any other political subdivision of this state, or
b.	any not-for-profit corporation acting pursuant to an agency, operating or management agreement which has been approved or authorized by the governing body of any of the entities specified in subparagraph a of this paragraph which conduct, operate or produce a fair commonly understood to be a county, district or state fair;
12.	a.	“Gross receipts”, “gross proceeds” or “sales price” means the total amount of consideration, including cash, credit, property and services, for which personal property or services are sold, leased or rented, valued in money, whether received in money or otherwise, without any deduction for the following:
(1)	the seller’s cost of the property sold,
(2)	the cost of materials used, labor or service cost,
(3)	interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, and any other expense of the seller,
(4)	charges by the seller for any services necessary to complete the sale, other than delivery and installation charges,
(5)	delivery charges and installation charges, unless separately stated on the invoice, billing or similar document given to the purchaser, and
(6)	credit for any trade-in.
b.	Such term shall not include:
(1)	discounts, including cash, term, or coupons that are not reimbursed by a third party that are allowed by a seller and taken by a purchaser on a sale,
(2)	interest, financing, and carrying charges from credit extended on the sale of personal property or services, if the amount is separately stated on the invoice, bill of sale or similar document given to the purchaser, and
(3)	any taxes legally imposed directly on the consumer that are separately stated on the invoice, bill of sale or similar document given to the purchaser,
c.	Such term shall include consideration received by the seller from third parties if:
(1)	the seller actually receives consideration from a party other than the purchaser and the consideration is directly related to a price reduction or discount on the sale,
(2)	the seller has an obligation to pass the price reduction or discount through to the purchaser,
(3)	the amount of the consideration attributable to the sale is fixed and determinable by the seller at the time of the sale of the item to the purchaser, and
(4)	one of the following criteria is met:
(a)	the purchaser presents a coupon, certificate or other documentation to the seller to claim a price reduction or discount where the coupon, certificate or documentation is authorized, distributed or granted by a third party with the understanding that the third party will reimburse any seller to whom the coupon, certificate or documentation is presented,
(b)	the purchaser identifies himself or herself to the seller as a member of a group or organization entitled to a price reduction or discount; provided, a “preferred customer” card that is available to any patron does not constitute membership in such a group, or
(c)	the price reduction or discount is identified as a third-party price reduction or discount on the invoice received by the purchaser or on a coupon, certificate or other documentation presented by the purchaser;
13.  “Maintaining a place of business in this state” means and includes having or maintaining in this state, directly or by subsidiary, an office, distribution house, sales house, warehouse, or other physical place of business, or having agents operating in this state, whether the place of business or agent is within this state temporarily or permanently or whether the person or subsidiary is authorized to do business within this state;
14.  “Manufacturing” means and includes the activity of converting or conditioning tangible personal property by changing the form, composition, or quality of character of some existing material or materials, including natural resources, by procedures commonly regarded by the average person as manufacturing, compounding, processing or assembling, into a material or materials with a different form or use whether or not the production is based on a customer’s order or product specifications and those remanufacturing activities defined or classified in the NAICS Manual under Industry Sector Nos. 31, 32 and 33.  “Manufacturing” does not include extractive industrial activities such as mining, quarrying, logging, and drilling for oil, gas and water, nor oil and gas field processes, such as natural pressure reduction, mechanical separation, heating, cooling, dehydration and compression;
15.  “Manufacturing operation” means the designing, manufacturing, compounding, processing, assembling, warehousing, or preparing of articles for sale as tangible personal property.  A manufacturing operation begins at the point where the materials enter the manufacturing site and ends at the point where a finished product leaves the manufacturing site.  “Manufacturing operation” does not include administration, sales, distribution, transportation, site construction, or site maintenance.  “Manufacturing operation” is not required to maintain raw materials or finished goods inventory to qualify.  Extractive activities and field processes shall not be deemed to be a part of a manufacturing operation even when performed by a person otherwise engaged in manufacturing;
16.  “Manufacturing site” means a location where a manufacturing operation is conducted, including a location consisting of one or more buildings or structures in an area owned, leased, or controlled by a manufacturer;
17.  “Over-the-counter drug” means a drug that contains a label that identifies the product as a drug as required by 21 C.F.R., Section 201.66.  The over-the-counter-drug label includes:
a.	a “Drug Facts” panel, or
b.	a statement of the “active ingredient(s)” with a list of those ingredients contained in the compound, substance or preparation;
18.  “Person” means any individual, company, partnership, joint venture, joint agreement, association, mutual or otherwise, limited liability company, corporation, estate, trust, business trust, receiver or trustee appointed by any state or federal court or otherwise, syndicate, this state, any county, city, municipality, school district, any other political subdivision of the state, or any group or combination acting as a unit, in the plural or singular number;
19.  “Prescription” means an order, formula or recipe issued in any form of oral, written, electronic, or other means of transmission by a duly licensed “practitioner” as defined in Section 1357.6 of this title;
20.  “Prewritten computer software” means “computer software”, including prewritten upgrades, which is not designed and developed by the author or other creator to the specifications of a specific purchaser.  The combining of two or more prewritten computer software programs or prewritten portions thereof does not cause the combination to be other than prewritten computer software.  Prewritten software includes software designed and developed by the author or other creator to the specifications of a specific purchaser when it is sold to a person other than the purchaser.  Where a person modifies or enhances computer software of which the person is not the author or creator, the person shall be deemed to be the author or creator only of such person’s modifications or enhancements.  Prewritten software or a prewritten portion thereof that is modified or enhanced to any degree, where such modification or enhancement is designed and developed to the specifications of a specific purchaser, remains prewritten software; provided, however, that where there is a reasonable, separately stated charge or an invoice or other statement of the price given to the purchaser for such modification or enhancement, such modification or enhancement shall not constitute prewritten computer software;
21.  “Repairman” means any person who performs any repair service upon tangible personal property of the consumer, whether or not the repairman, as a necessary and incidental part of performing the service, incorporates tangible personal property belonging to or purchased by the repairman into the tangible personal property being repaired;
22.  “Sale” means the transfer of either title or possession of tangible personal property for a valuable consideration regardless of the manner, method, instrumentality, or device by which the transfer is accomplished in this state, or other transactions as provided by this paragraph, including but not limited to:
a.	the exchange, barter, lease, or rental of tangible personal property resulting in the transfer of the title to or possession of the property,
b.	the disposition for consumption or use in any business or by any person of all goods, wares, merchandise, or property which has been purchased for resale, manufacturing, or further processing,
c.	the sale, gift, exchange, or other disposition of admission, dues, or fees to clubs, places of amusement, or recreational or athletic events or for the privilege of having access to or the use of amusement, recreational, athletic or entertainment facilities,
d.	the furnishing or rendering of services taxable under the Oklahoma Sales Tax Code, and
e.	any use of motor fuel or diesel fuel by a supplier, as defined in Section 500.3 of this title, upon which sales tax has not previously been paid, for purposes other than to propel motor vehicles over the public highways of this state.  Motor fuel or diesel fuel purchased outside the state and used for purposes other than to propel motor vehicles over the public highways of this state shall not constitute a sale within the meaning of this paragraph;
23.  “Sale for resale” means:
a.	a sale of tangible personal property to any purchaser who is purchasing tangible personal property for the purpose of reselling it within the geographical limits of the United States of America or its territories or possessions, in the normal course of business either in the form or condition in which it is purchased or as an attachment to or integral part of other tangible personal property,
b.	a sale of tangible personal property to a purchaser for the sole purpose of the renting or leasing, within the geographical limits of the United States of America or its territories or possessions, of the tangible personal property to another person by the purchaser, but not if incidental to the renting or leasing of real estate,
c.	a sale of tangible goods and products within this state if, simultaneously with the sale, the vendor issues an export bill of lading, or other documentation that the point of delivery of such goods for use and consumption is in a foreign country and not within the territorial confines of the United States.  If the vendor is not in the business of shipping the tangible goods and products that are purchased from the vendor, the buyer or purchaser of the tangible goods and products is responsible for providing an export bill of lading or other documentation to the vendor from whom the tangible goods and products were purchased showing that the point of delivery of such goods for use and consumption is a foreign country and not within the territorial confines of the United States, or
d.	a sales sale of any carrier access services, right of access services, telecommunications services to be resold, or telecommunications used in the subsequent provision of, use as a component part of, or integrated into, end-to-end telecommunications service;
24.  “Tangible personal property” means personal property that can be seen, weighed, measured, felt, or touched or that is in any other manner perceptible to the senses.  “Tangible personal property” includes electricity, water, gas, steam and prewritten computer software.  This definition shall be applicable only for purposes of the Oklahoma Sales Tax Code;
25.  “Taxpayer” means any person liable to pay a tax imposed by the Oklahoma Sales Tax Code;
26.  “Tax period” or “taxable period” means the calendar period or the taxpayer’s fiscal period for which a taxpayer has obtained a permit from the Tax Commission to use a fiscal period in lieu of a calendar period;
27.  “Tax remitter” means any person required to collect, report, or remit the tax imposed by the Oklahoma Sales Tax Code.  A tax remitter who fails, for any reason, to collect, report, or remit the tax shall be considered a taxpayer for purposes of assessment, collection, and enforcement of the tax imposed by the Oklahoma Sales Tax Code; and
28.  “Vendor” means:
a.	any person making sales of tangible personal property or services in this state, the gross receipts or gross proceeds from which are taxed by the Oklahoma Sales Tax Code,
b.	any person maintaining a place of business in this state and making sales of tangible personal property or services, whether at the place of business or elsewhere, to persons within this state, the gross receipts or gross proceeds from which are taxed by the Oklahoma Sales Tax Code,
c.	any person who solicits business by employees, independent contractors, agents, or other representatives or by distribution of catalogs or other advertising matter, and thereby makes sales to persons within this state of tangible personal property or services, the gross receipts or gross proceeds from which are taxed by the Oklahoma Sales Tax Code, or
d.	any person, pursuant to an agreement with the person with an ownership interest in or title to tangible personal property, who has been entrusted with the possession of any such property and has the power to designate who is to obtain title, to physically transfer possession of, or otherwise make sales of the property.
SECTION 3.  This act shall become effective July 1, 2013.
SECTION 4.  It being immediately necessary for the preservation of the public peace, health and safety, an emergency is hereby declared to exist, by reason whereof this act shall take effect and be in full force from and after its passage and approval.

54-1-5970	MAH	01/09/13