JWB H.B. 1411 75(R)BILL ANALYSIS


WAYS & MEANS
H.B. 1411
By: Oliveira
3-25-97
Committee Report (Unamended)



BACKGROUND 

Telephone prepaid calling cards are a relatively new product offered by
the telecommunications industry. These cards have a preset value in the
form of minutes which are debited according to the use of the card.  The
telecommunication provider connects the customer, tracks the charge for
the call, and reduces the available amount in its records.  There are no
limitations on where the calls originate, or their duration. These cards
are usually sold in convenience stores and other retail outlets. 

Currently, telephone prepaid calling cards are taxed as telecommunications
services for purposes of the sales tax.  Companies that issue the cards
must track the call and the charge, then try and determine the proper
amount of sales tax due, and to what political subdivision it's due.
Changing the tax treatment of the cards to "tangible personal property",
which is taxed at the point of sale, could eliminate the accounting
burdens of determining the proper amount of sales tax and the appropriate
location to which it's due. 

PURPOSE

This bill would change the definition of prepaid calling cards from
telecommunications services to tangible personal property for the purposes
of the sales tax. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency or
institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.Amends Subchapter A, Chapter 151, Tax Code, by adding Section
151.0037, TELEPHONE PREPAID CALLING CARD, defining a telephone prepaid
calling card as a card or other item, including an access code, that
represents the right to make one or more telephone calls for which payment
has been previously made. 

SECTION 2.Amends Section 151.009, Tax Code, defining a telephone prepaid
calling card as "tangible personal property," for the purposes of sales
tax. 

SECTION 3.Amends Section 151.0103, Tax Code, by striking telephone prepaid
calling cards from the definition of "telecommunications services" for the
purposes of the sales tax. 

SECTION 4.  Establishes the effective date.

SECTION 5.Emergency clause.