BILL ANALYSIS


                                                     C.S.S.B. 640
                                                     By: Montford
                                                          Finance
                                                         04-04-95
                                   Committee Report (Substituted)
BACKGROUND

Each year, the Comptroller of Public Accounts evaluates those areas
of state law administered by that agency.  In the course of these
evaluations, a number of recommendations are produced that would
simplify tax collection and enforcement procedures for both
taxpayers and the Comptroller's Office.  These recommendations
represent technical corrections and changes which clarify, correct,
or conform existing statutory provisions of the Tax Code.

PURPOSE

As proposed, C.S.S.B. 640 regulates the manner in which the
comptroller imposes, collects, and enforces certain taxes.

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 Section 111.010(c), Tax Code, by providing that
venue for and jurisdiction of a suit arising under this section is
exclusively conferred upon the district courts of Travis County.

SECTION 2. Amends Section 111.060(c), Tax Code, to provide that
Subsection (b) of this section does not apply to the taxes imposed
by certain chapters of this code or under an agreement made under
Section 153.017 of this code.

SECTION 3. Amends Section 111.101, Tax Code, by deleting existing
Subsection (b) regarding a settlement being ineffective.

SECTION 4. Amends Section 111.201, Tax Code, by deleting existing
Subsection (b), prohibiting a refund of any tax imposed by this
title from being made by the comptroller after four years after the
date the tax was paid.

SECTION 5. Amends Section 151.0036, Tax Code, by adding Subsection
(c), to define "debt collection service."

SECTION 6. Amends Section 151.0048, Tax Code, to define "real
property service" and "contractor."  Makes a conforming change.

SECTION 7. Amends Section 151.154, Tax Code, as follows:

     Sec.  151.154.  RESALE CERTIFICATE:  LIABILITY OF PURCHASER. 
     (a)  Requires the purchaser to be liable for payment of the
     sales tax on the value of the taxable item for any period
     during which the taxable item, rather than tangible personal
     property, is used, rather fair market value, if a purchaser
     who gives a resale certificate makes any use of the taxable
     item. 
     
     (b)  Provides that the value of an item of tangible personal
       property is the fair market rental value of the tangible
       personal property, which is the amount that a purchaser
       would pay on the open market to rent or lease the tangible
       personal property.  Provides that the value of a taxable
       service is the fair market value of the taxable service,
       which is the amount that a purchaser would pay on the open
       market to obtain the service for the use of the purchaser.
       
       (c)  Requires the original purchase price to be the measure
       of the tax, if an item of tangible personal property has no
       fair market rental value or if a taxable service has no fair
       market value.
       
       (d)   Authorizes the person making the divergent use to pay
       a sales tax on the original purchase price without credit
       for taxes previously paid.  Makes conforming changes. 
       
       (e)  Redesignates existing Subsection (b).  Makes conforming
       changes.
SECTION 8. Amends Section 151.155, Tax Code, to make conforming
changes.

SECTION 9. Amends Section 151.157(f), Tax Code, to make a
nonsubstantive change.
     
SECTION 10.    Amends Section 151.313(a), Tax Code, by including
hospital beds in the items that are exempted from the taxes imposed
by this chapter.

SECTION 11.    Amends Section 151.314(e), Tax Code, by providing
that a sale is exempted under this subsection if the sale is made
by a person under 19 years old who is a member of a nonprofit
organization.

SECTION 12.    Amends Section 151.316, Tax Code, by amending
Subsection (a) and adding Subsections (c) and (d), as follows:

     (a)  Adds the first $50,000 of the cost of each unit of
     machinery or equipment purchased to be used exclusively in
     site preparation, planting, cultivation, or harvesting of
     timber to the list of items that are exempt from the taxes
     imposed by this chapter.
     
     (c)  Authorizes two or more corporations that operate
     agricultural activities on the same tract or adjacent tracts
     of land and that are entirely owned by an individual or a
     combination of the individual, the individual's spouse, and
     the individual's children to qualify as an "original producer"
     for the purposes of Subsection (a)(8).
     
     (d)  Defines "farm or ranch."
     
SECTION 13.    Amends Section 151.317(c), Tax Code, to define
"residential use."  Makes conforming changes.

SECTION 14.    Amends Sections 151.318, Tax Code, by amending
Subsections (b), (e), (m), and (n) and adding Subsection (q), as
follows:

          (b)  Includes semiconductor fabrication cleanrooms and
     equipment to the list of exemptions.
     (e)  Provides that this section does not apply to any taxable
     item rented or leased for less than one year to a person
     engaged in manufacturing.
     
     (m)  Makes a nonsubstantive change.
     
     (n)  Provides that a person engaged in overhauling,
     retrofitting, or repairing jet turbine aircraft engines and
     their component parts is entitled to a refund or a reduction
     in the amount of tax imposed by this chapter for the purchase
     of machinery, equipment, replacement parts or accessories with
     a useful life in excess of six months, or supplies, including
     aluminum oxide, nitric acid, and sodium cyanide, used in
     electrochemical plating or a similar process that are used or
     consumed in the overhauling, retrofitting, or repairing.
     
     (q)  Defines "semiconductor fabrication cleanrooms and
     equipment."
     
     SECTION 15.    Amends Section 151.319(e), Tax Code, to delete
wrapping, packing, and packaging supplies from the list of items
not exempted by Subsection (d) of this section.  Makes a
nonsubstantive change.

SECTION 16.    Amends Section 151.350, Tax Code, as follows:

     Sec. 151.350.  New heading:  LABOR TO RESTORE CERTAIN
     PROPERTY.  (a)  Provides that labor to restore, rather than
     repair, real or tangible personal property is exempted from
     the taxes imposed by this chapter if the restoration is
     performed on property damaged within a disaster area by the
     condition that caused the area to be declared a disaster area.
     
     (b)  Provides that the exemption under this section does not
       apply to tangible personal property transferred by the
       service provider to the purchaser as part of the service.
       
       (d)  Defines "restore."
     SECTION 17.    Amends Section 151.509, Tax Code, to require a
person petitioning for a redetermination of a determination made
under Section 111.022 to file, before the determination becomes
final, security as the comptroller requires to ensure compliance
with this chapter.  Authorizes the security to be sold by the
comptroller in the manner provided by Chapter 111A.

SECTION 18.    Amends Section 151.712(g), Tax Code, to make, rather
than 151.506, a nonsubstantive change. 

SECTION 19.    Amends Sections 153.002(b) and (d), Tax Code, as
follows:

     (b)  Authorizes a lessor to be issued a permit as an
     interstate trucker when an application, rather than an
     application and bond, has been properly filed with and
     approved by the comptroller.
     
     (d)  Authorizes, rather than requires, a lessor to file with
     his application for an interstate trucker permit one copy of
     the form-lease or service contract he enters into with the
     various lessees of his motor vehicles.  Authorizes, rather
     than requires, the lessor to make and assign to each motor
     vehicle he leases for interstate operation a photocopy of the
     permit to be carried in the cab compartment of the motor
     vehicle.
     
SECTION 20.    Amends Section 153.017, Tax Code, by amending
Subsections (b) and (f) and adding Subsections (g) and (h), as
follows:

     (b)  Authorizes an agreement to provide certain information.
     
     (f)  Provides a statute of this state prevails over an
     inconsistent provision of an agreement entered into under this
     section except as otherwise provided by this section.
     
     (g)  Authorizes the comptroller to segregate in a separate
     fund or account the amount of motor fuel taxes estimated to be
     due to other jurisdictions or otherwise subject to refund
     during the fiscal year, penalties and interest on those taxes
     due other jurisdictions, licensing fees, and other costs
     collected under the agreement.  Authorizes the comptroller to
     issue a warrant or make an electronic transfer of the amount
     as necessary to carry out the purposes of the agreement on a
     determination of an amount held that is due to be remitted to
     another jurisdiction.  Authorizes an auditing cost, membership
     fee, and other cost associated with the agreement to be paid
     from interest earned on funds segregated under this
     subsection.  Requires any interest earnings in excess of the
     costs associated with the agreement to be credited to general
     revenue.
     
     (h)  Provides that the legislature finds that it is in the
     public interest to enter into motor fuel tax agreements with
     other jurisdictions that may provide for the temporary
     remittal of amounts due other jurisdictions that exceed the
     amounts collected.  Requires the comptroller to ensure that
     reasonable measures are developed to recover motor fuel taxes
     and other amounts due this state during each biennium.
     
     SECTION 21.    Amends Section 153.116(e), Tax Code, to make
nonsubstantive changes.

SECTION 22.    Amends Section 153.205, Tax Code, by adding
Subsection (i), to prohibit a permitted supplier from making a tax-free sale to a purchaser using a signed statement for the sale of
more than 3,000 gallons of diesel fuel in a single transaction, or
in a calendar month in which the supplier has previously sold more
than 10,000 gallons of diesel fuel to the purchaser.

SECTION 23.    Amends Section 153.206(f), Tax Code, to make
conforming changes.

SECTION 24.    Amends Section 153.218(e), Tax Code, to make
conforming changes.

SECTION 25.    Amends Section 153.220(a), Tax Code, to require a
delivery of diesel fuel into the fuel supply tanks of a motor
vehicle operated for commercial purposes and described by Section
153.001(12), rather than having a capacity of 60 or more gallons,
to be evidenced by an invoice issued in duplicate by a dealer.

SECTION 26.    Amends Section 153.304, Tax Code, to provide that a
dealer's permit authorizes a dealer to collect and remit taxes on
liquefied gas delivered into the fuel supply tanks of motor
vehicles displaying an out-of-state license plate, the motor
vehicle of an interstate trucker licensed under an agreement
entered into under Section 153.017, or a motor vehicle displaying
a motor vehicle dealer's liquefied gas tax decal.

SECTION 27.    Amends Section 153.305, Tax Code, by adding
Subsection (e), to provide that an interstate trucker is not
required to prepay the tax under Subsection (a) for a motor vehicle
operated for commercial purposes and described by Section
153.001(12).

SECTION 28.    Amends Section 153.306, Tax Code, to make conforming
changes.

SECTION 29.    Amends Section 153.402, Tax Code, to provide that a
person forfeits to the state a civil penalty of not less than $25
nor more than $200 if the person makes a delivery of liquefied gas
into the fuel supply tank of a motor vehicle bearing Texas license
plates and no Texas liquefied gas tax decal, unless licensed under
a multistate fuels tax agreement.

SECTION 30.    Amends Section 153.403, Tax Code, to make conforming
changes.

SECTION 31.    Amends Section 154.042(d), Tax Code, to provide that
a plan for achieving compliance that is submitted to the treasurer
under Subsection (c) is confidential and not subject to the open
records law, Chapter 552, Government Code.

SECTION 32.    Amends Section 154.051(m), Tax Code, to make
conforming changes.

SECTION 33.    Amends Section 154.101(g), Tax Code, to make
conforming changes.

SECTION 34.    Amends Section 154.114, Tax Code, as follows:

     Sec.  154.114.  New heading:  FINAL SUSPENSION OR REVOCATION
     OF A PERMIT.  (a)  Authorizes the treasurer to suspend or
     revoke a person's permit.
     
     (c)  Requires the treasurer to mail the written notice by
       certified mail, return receipt requested, to the permit
       holder's mailing address as it appears on the treasurer's
       records.
       
       (d)  Requires the treasurer to give the permit holder not
       less than 10 days' notice of a final hearing.
     SECTION 35.    Amends Chapter 154D, Tax Code, by adding Section
154.1141, as follows:

     Sec.  154.1141.  SUMMARY SUSPENSION OF A PERMIT.  (a) 
     Authorizes the treasurer to suspend a person's permit without
     notice or a hearing for the person's failure to comply with
     this chapter or a rule adopted under this chapter if the
     person's continued operation constitutes an immediate and
     substantial threat to the collection of taxes imposed by this
     chapter and attributable to the person's operation.
     
     (b)  Requires proceedings for a preliminary hearing before
       the treasurer or the treasurer's representative to be
       initiated simultaneously with the summary suspension if the
       treasurer summarily suspends a person's permit.  Requires
       the preliminary hearing to be set for a certain date.
       
       (c)  Requires the permit holder to show cause, at the
       preliminary hearings, why the permit should not remain
       suspended pending a final hearing on suspension or
       revocation.
       
       (d)  Provides that Chapter 2001, Government Code, does not
       apply to a summary suspension under this section.
       
       (e)  Requires the treasurer to serve notice on the permit
       holder informing the permit holder of the right to a
       preliminary hearing before the treasurer or the treasurer's
       representative and of the time and place of the preliminary
       hearing to initiate a proceeding to suspend summarily a
       person's permit.  Requires the notice to be personally
       served on the permit holder, or sent by mail, to the permit
       holder's mailing address as it appears in the treasurer's
       records.  Requires the notice to state the alleged
       violations that constitute the grounds for summary
       suspension.  Provides that the suspension is effective at
       the time the notice is served.  Requires the permit holder
       to immediately surrender the permit to the treasurer or the
       treasurer's representative if the notice is served in
       person.  Requires the permit holder to immediately return
       the permit to the treasurer if notice is served by mail.
       
       (f)  Provides that Section 154.114, governing hearings for
       final suspension or revocation of a permit under this
       chapter, governs a final administrative hearing under this
       section.
     SECTION 36.    Amends Section 154.1145, Tax Code, to require the
treasurer to conduct all hearings required by this chapter in
accordance with Chapter 2001, Government Code, unless otherwise
provided by this chapter.

SECTION 37.    Amends Section 154.201, Tax Code, to make conforming
and nonsubstantive changes.

SECTION 38.    Amends Section 154.301, Tax Code, as follows:

     Sec.  154.301.  New heading:  COMPLIANCE INVESTIGATION AND
     RECOVERY OF COSTS.  (a)  Authorizes the treasurer to employ
     auditors and investigators to determine compliance and any
     amount due if the treasurer has reason to believe that a
     person has failed to pay a tax or penalty in the proper manner
     when due or otherwise failed to comply with this chapter. 
     Makes conforming changes.
     
     (b)  Requires the treasurer to deposit funds paid under this
       section to the credit of the general revenue fund in the
       treasury to be used for making audits, conducting
       investigations, or as otherwise appropriated.  Makes
       conforming changes.
     SECTION 39.    Amends Section 154.304(a), Tax Code, to authorize
the treasurer to remain on the premises as long as necessary to
determine the tax liability or compliance with this chapter to
determine the tax liability of a person dealing in cigarettes or
compliance by the person with this chapter.

SECTION 40.    Amends Section 154.308, Tax Code, as follows:

     Sec.  154.308.  New heading:  DEFICIENCY DETERMINATION,
     PENALTIES, AND INTEREST.  (a)  Makes conforming changes.
     
SECTION 41.    Amends Section 155.041(g), Tax Code, to make
conforming changes.

SECTION 42.    Amends Section 155.059, Tax Code, as follows:

     Sec.  155.059.  New heading:  FINAL SUSPENSION OR REVOCATION
     OF PERMIT.  Makes conforming changes.
     
     SECTION 43.    Amends Chapter 155C, Tax Code, by adding Section
155.0591, as follows:  

     Sec.  155.0591.  SUMMARY SUSPENSION OF A PERMIT. (a)-(e)  Make
     conforming changes.
     
     (f)  Provides that Section 155.059, governing hearings for
     final suspension or revocation of a permit, governs a final
     administrative hearing.
SECTION 44.    Amends Section 155.0595, Tax Code, to make
conforming changes.

SECTION 45.    Amends Section 155.101, Tax Code, to add export
warehouses to the businesses required to keep records of all
tobacco products purchased or received.

SECTION 46.    Amends Section 155.181, Tax Code, as follows:

     Sec.  155.181.  New heading:  COMPLIANCE INVESTIGATION AND
     RECOVERY COSTS.  Authorizes the treasurer to require a person
     who has failed to comply with this Chapter to pay reasonable
     expenses incurred in the compliance investigation as an
     additional penalty.  Authorizes the comptroller to use funds
     as appropriated by the legislature.
SECTION 47.    Amends Section 155.183(a), Tax Code, to make
conforming changes.

SECTION 48.    Amends Section 155.185, Tax Code, as follows:

     Sec.  155.185.  New heading:  DEFICIENCY DETERMINATION,
     PENALTIES AND INTEREST.  Authorizes the treasurer to compute
     and determine the amount of tax, penalty, and interest to be
     paid from information in a report, if the treasurer believes
     the tax report is inaccurate.
     
SECTION 49.    Amends Section 155.212, Tax Code, to provide that a
person commits an offense if the person knowingly makes, delivers
to, and files with the treasurer a false return or an incomplete
return or report.

SECTION 50.    Amends Section 156.001, Tax Code, to define "hotel."

     SECTION 51.    Amends Section 159.101(f), (g), (h), and (i), Tax
Code, as follows:

     (f)  Deletes existing Subsection (f) regarding a tax
     collection in jeopardy.  Redesignates existing Subsection (g).
     
     (g) and (h) Redesignate existing Subsections (h) and (i).
     
     SECTION 52.    Amends Section 159.103, Tax Code, to provide that
the possession, purchase, acquisition, importation, manufacture, or
production of a taxable substance is exempt from the tax imposed by
this chapter.

SECTION 53.    Amends the heading to Subchapter C, Chapter 159, Tax
Code, as follows:

                SUBCHAPTER C.  CRIMINAL PROVISIONS

SECTION 54.    Amends Section 159.203, Tax Code, as follows:

     (a) Created from existing text.
     
     (b)  Provides that an offense under this section is a felony
     of the third degree.
     
     (c)  Provides that venue of a prosecution under this section
     is in Travis County.
     
     SECTION 55.    Amends Section 159.205, Tax Code, as follows:

     Sec.  159.205.  New heading:  RIGHT TO COLLECT SUBORDINATE TO
     OTHER LAWS.  (a)  Deletes existing subsection regarding seized
     property and redesignates existing Subsection (b).
     
     (b)  Created from existing Subsection (b).
     
SECTION 56.    Amends Section 159.206, Tax Code, by deleting
existing Subsection (b) regarding an administrative hearing.

SECTION 57.    Amends Section 201.201, Tax Code, to provide that
the tax due by this chapter for gas produced and saved is due at
the office of the comptroller in Austin on the 20th day of the
second month following the month of production, rather than the
last day of each calendar month for gas produced and saved in the
preceding month.  

SECTION 58.    Amends Section 361.138, Health and Safety Code, by
amending Subsection (a) and adding Subsections (l), (m), and (n),
as follows:

     (a)  Defines "engaged in business in this state," "lead-acid,"
     "purchased for resale," and "storage and use."
     
     (l)  Provides that a fee is imposed on the storage, use, or
     other consumption in this state of a lead-acid battery at the
     same rate as provided by Subsection (b), unless purchased for
     resale.
     
     (m)  Provides that a person storing, using, or consuming a
     lead-acid battery in this state is liable for the fee imposed
     by Subsection (l) and is responsible for reporting and paying
     it to the comptroller in the same manner as a person required
     to collect the fee provided for in Subsections (c)(2) and (d).
     
     (n)  Provides that a person storing, using, or consuming a
     lead-acid battery in this state is not liable for the fee if
     the person pays the fee to a wholesaler or retailer engaged in
     business in this state or other person authorized by the
     comptroller to collect the fee and receives from the person a
     receipt showing that the fee has been paid.
     
     SECTION 59.    Amends Section 361.472, Health and Safety Code, by
adding Subsection (k) to define "engaged in business in this
state," "purchased for resale," "storage," and "use." 

SECTION 60.    Amends Section 361.472(c), Health and Safety Code,
to prohibit a fee from being assessed for a bicycle tire or a solid
industrial tire.

SECTION 61.    Amends Section 4A(e), Article 5190.6, V.T.C.S.
(Development Corporation Act of 1979), to provide that the tax
imposed by this section takes effect as provided by Section
321.102(a), Tax Code.  Deletes a provision regarding an election
being held and an additional sales and use tax being adopted or
repealed.

SECTION 62.    Amends Sections 12(3) and (6), Article 8817,
V.T.C.S., to make nonsubstantive changes.

SECTION 63.    Amends Section 19(1), Article 8817, V.T.C.S., to
make nonsubstantive changes.

SECTION 64. Repealer:  Section 159.204, Tax Code (Property Subject
to Seizure).

SECTION 65.    Makes application of this Act prospective.  Provides
that this subsection does not apply to the change made by Section
201.201, Tax Code, of this Act for taxes made due in the second
month after the effective date.

SECTION 66.    Requires the comptroller to administer this Act
consistent with legislation, if enacted, transferring the
responsibilities of the treasurer to the comptroller.

SECTION 67.    Effective date:  October 1, 1995.

SECTION 68.    Emergency clause.