Sec. 19. 36 MRSA §1811, 2nd ¶, as amended by PL 1977, c. 198, §6, is further amended to read:

The tax imposed upon the sale and distribution of gas, water or electricity, or telephone or telegraph service telecommunications services, by any public utility, the rates for which sale and distribution are established by the Public Utilities Commission, shall must be added to the rates so established. No tax shall may be imposed upon the sale or use of electrical energy, or water stored for the purpose of generating electricity, when the sale is to or by a wholly owned subsidiary by or to its parent corporation, except for electrical energy or water purchased for resale to or by such wholly owned subsidiary.

SUMMARY

This bill contains the recommendations of the Task Force to Study Telecommunications Taxation established by Resolve 1997, chapter 121. The bill makes the following changes.

The bill replaces the definition of taxable "telephone and telegraph service" in the sales tax law with a definition of "telecommunications services." The new definition clarifies the meaning of the old definition, ensures that unbundled network elements sold to another provider of telecommunications services are not taxable and excludes prepaid calling arrangements from the definition of "telecommunications services."

The bill excludes from sales tax the sale of cable television converter boxes to a provider of cable television services.

The bill provides that a prepaid calling arrangement is a taxable service under the sales tax law.

The bill requires the Bureau of Revenue Services to monitor legal and technological developments in the field of telecommunications and report to the Legislature any need for change to the State's tax laws.

The bill provides sales tax exemptions for machinery and equipment used directly and primarily to provide communications