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.