BILL ANALYSIS
C.S.H.B. 2940
By: Heflin
April 28, 1995
Committee Report (Substituted)
BACKGROUND
In the 73rd session, the Legislature passed SB 878, which added
Section 23.12A (Special Inventory) and 23.12B (Prepayment of Taxes
by Certain Taxpayers) to the Tax Code. These sections implemented
a new valuation and tax payment method for automobile, recreational
vehicle, and motorcycle inventories held for resale.
PURPOSE
The purpose of this bill is to include inventories of small boats
(under 65 feet in length) within the provisions of Chapter 23, Tax
Code, providing for inventory appraisal based on prior year sales.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends subsection (a) of Section 23.12, Tax Code
(Inventory), by providing an exemption for Section
23.12D (added by this Act), for which special inventory
appraisal will be made. Existing law allows this
provision for auto dealers.
SECTION 2. Amends subsection (f) of Section 23.12, Tax Code
(Inventory), by allowing a boat dealer to have inventory
appraised at its market value as of September 1 of the
previous year. Currently, auto dealers may utilize this
existing provision.
SECTION 3. Amends Subchapter B, Chapter 23, Tax Code, by adding
Section 23.12D DEALER'S VESSEL AND OUTBOARD INVENTORY;
VALUE.
Subsection (a) defines chief appraiser, collector,
dealer, dealer's vessel and outboard motor inventory,
dealer-financed sale, declaration, fleet transaction,
outboard motor, owner, person, sales price, subsequent
sale, total annual sales, vessels (including provision
that excludes those of more than 65 feet in length or
canoes, kayaks, punts, rubber rafts, or others under 14
feet in length).
Subsection (b) states that the total inventory of a boat
dealer on January 1 is derived from total annual sales,
less sales to other dealers, fleet sales, and subsequent
sales, for the 12 month period corresponding to the
prior tax year divided by 12.
Subsection (c) allows a chief appraiser to estimate a
dealer's inventory for dealers who have come into
business since January 1 of the previous tax year.
Subsection (d) requires a chief appraiser to appraise
dealers who primarily sell to other dealers as provided
by Section 23.12.
SECTION 3. Subsection (e) states that a dealer is presumed to be
the owner of a vessel if the
(Contd.) dealer has sold the vessel to anyone other than another
dealer in the preceding 12 months.
Subsection (f) requires a dealer to file a Dealer's
Vessel and Outboard Motor Inventory Declaration with the
chief appraiser and the tax assessor-collector. This
form, to be promulgated by the comptroller, will provide
the name and address of each location where the dealer
does business, the dealer's and manufacturer's numbers
provided by the Texas Parks & Wildlife Department, an
inventory owner's statement, and the market value of the
inventory computed under Section 23.12D, subsection (b).
Subsection (g) allows a chief appraiser to examine the
books and records of a dealer. Gives the dealer at
least 15 days to respond to such a request. Also gives
a dealer a right to seek judicial relief from compliance
with the request.
Subsection (h) requires the chief appraiser to report
to Parks & Wildlife dealers who fail to file a
declaration, or dealers who report the sale of less than
five vessels or outboard motors in the previous year.
Subsection (i) allows a misdemeanor penalty fine of up
to $500 daily for dealers who fail to file a
declaration.
Subsection (j) allows a misdemeanor penalty fine of up
to $500 daily for a chief appraiser who does not comply
with subsection (h).
Subsection (k) allows, in addition to other penalties,
that a dealer who fails to file a declaration shall
forfeit a penalty. The dealer is also subject to a tax
lien.
SECTION 4. Amends Subchapter B, Chapter 23, Tax Code, by adding
Section 23.12E PREPAYMENT OF TAXES BY CERTAIN TAXPAYERS.
Subsection (a) defines aggregate tax rate as the total
amount of taxes levied by all relevant taxing units upon
a dealer's inventory. Relevant taxing unit is a taxing
unit that is authorized to levy property taxes against
a dealer's inventory. A statement is defined as an
inventory tax statement filed on a form promulgated by
the comptroller. Unit property tax factor is 1/12 of
the prior year aggregate tax rate at the dealer's
location. Other definitions: chief appraiser,
collector, dealer's vessel and outboard motor inventory,
declaration, owner, sales price, subsequent sale, and
total annual sales are given the same meaning as in
Section 23.12D.
Subsection (b) requires an owner to assign a property
tax to each inventory unit not sold to another dealer,
sold in a fleet transaction, or sold in a subsequent
sale. The unit property tax is determined by
multiplying the sales price by the unit property tax
factor. Requires the owner to send monthly statements
and tax payments based on sales to the assessor-collector by the 10th of every month. The collector is
required to keep the funds in escrow for prepayment of
taxes.
Subsection (c) states that a collector need not keep
separate escrow accounts for all payers under this
section. Also allows a collector to retain the interest
from an escrow account to cover costs related to
administering the prepayment procedure.
Subsection (d) prohibits an owner from withdrawing funds
in an escrow account under this section.
Subsection (e) requires the comptroller to create a
Dealer's Vessel and Outboard Motor Inventory Tax
Statement, which a dealer is required to use. The form
shall contain at least the following information: 1)
description of the vessel or
SECTION 4. outboard motor sold, 2) the sales price, 3) the unit
property tax of the vessel or
(Contd.) motor, if any, and 4) the reason no tax was assigned to
a unit if no tax was assigned.
Subsection (f) requires a dealer to file a copy of the
statement with the chief appraiser. A chief appraiser
or a collector may examine the documents of a dealer in
the same manner of Section 23.12D, Subsection (g).
Subsection (g) makes the requirements of subsection (f)
applicable to all dealers, whether or not they owe any
inventory tax for the current year. Also establishes
filing procedures for people who become dealers after
January 1.
Subsection (h) allows a collector to establish a
procedure where a tax is paid when the title is
transferred.
Subsection (i) calls for each relevant taxing unit to
itemize the taxes against a dealer's inventory and
provide a copy of the bill to the collector if the
assessor and the collector are not one and the same.
The collector then applies the money in escrow to the
bill and delivers a tax receipt to the owner.
Subsection (j) allows the collector to bill the owner
for any amount not already covered by funds in escrow.
Subsection (k) provides for payment of deficiency taxes
by the collector to each relevant taxing unit.
Subsection (l) allows a person buying a dealer's
business or assets to agree to pay the current year's
inventory tax. The owner and the buyer must jointly
notify the chief appraiser and the collector of such an
agreement. This also gives a buyer a year from
acquisition to pay the taxes.
Subsection (m) provides a $100 daily fine for any dealer
who does not file a statement.
Subsection (n) states that, in addition to other
penalties, a dealer who fails to file a statement shall
forfeit a penalty. The dealer is also subject to a tax
lien.
Subsection (o) provides a five percent penalty for
failure to remit taxes due. If the amount is not paid
within 10 after the due date, there is an additional
penalty of five percent. Gives the tax collector
enforcement authority.
Subsection (p) directs fines and penalties to go to the
county general fund.
SECTION 5. Amends Subchapter B, Chapter 23, Tax Code, by adding
Section 23.12F DECLARATIONS AND STATEMENTS CONFIDENTIAL.
Subsection (a) provides that the definitions of
collector, chief appraiser, dealer, declaration, owner,
and statement have the meaning already assigned by other
parts of the Code.
Subsection (b) provides for the confidentiality of
declarations and statements. Allows an appraisal office
employee or county tax assessor-collector employee to
review records for carrying out their responsibilities.
Subsection (c) provides exceptions to confidentiality
in the case of 1) subpoenas; 2) requests for release by
the person (or a designated representative of the
person) who filed the declaration or statement; 3) the
comptroller; 4) a collector or chief appraiser; 5) a
prosecuting attorney; 6) statistical reports if the
information does not identify specific property or
property owners; and 7) information required in a record
the appraisal or collection office is required to
prepare or maintain.
Subsection (d) provides a Class B misdemeanor penalty
for anyone who knowingly violates confidentiality.
SECTION 6. Effective Date: January 1, 1996.
SECTION 7. Emergency Clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
H.B. 2940 amended Sections 23.12A and 23.12B, Tax Code, to apply
the same treatment of ad valorem tax appraisal for small boat
inventories as is applied to automobile inventories.
C.S.H.B 2940, instead, adds Sections 23.12D and 23.12E to conform
to changes made to Sections 23.12A and 23.12B in C.S.H.B. 2624
which was reported from the Ways & Means Committee.
SUMMARY OF COMMITTEE ACTION
Public notice was posted in accordance with the rules, and a public
hearing was held on April 18, 1995. Representative Heflin
explained the bill. The committee considered a complete substitute
by Representative Heflin. Without objection, C.S.H.B. 2940 was
adopted. By a record vote of 8 ayes, 0 nays, 0 present not voting
and 3 absent, the committee voted to report H.B. 2940 to the House
as substituted with the recommendation that it be sent to the Local
and Consent Calendar and that it do pass.
Testimony received in favor of the bill:
Mark Woods, representing himself and the Boating Trades
Assn. TX
James D. Penny, representing the Boating Trades Assn.
of Metropolitan Houston