LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session March 17, 1997 TO: Honorable Pete Patterson, Chair IN RE: House Bill No. 2011 Committee on Agriculture & Livestock By: Patterson, L.P. "Pete" House Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on HB2011 ( Relating to the promotion of Texas agricultural products and the sale of wine; creating a vintner's permit; imposing a tax on the sale of wine; providing penalties.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by HB2011-As Introduced Implementing the provisions of the bill would result in a net negative impact of $(972,098) to General Revenue Related Funds through the biennium ending August 31, 1999. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. Fiscal Analysis The bill would make several changes in the Alcoholic Beverage Code relating to the promotion, sale, and taxation of wine, by establishing a new $300 Vintner's Permit and creating a retail tax of one cent per 750 milliliters (ml) of wine sold. The tax would be paid monthly to the Texas Department of Agriculture (TDA) by permit holders authorized to sell wine at retail. Revenue collected from the retail wine tax could be appropriated only to TDA to promote research and market wine in Texas. This bill would take effect September 1, 1997. Methodolgy The revenue gain from the retail wine tax was estimated by translating estimated wine excise tax revenue, which is taxed on a per gallon basis, into an equivalent number of 750 ml containers and applying the one cent per container retail wine tax rate. This figure was adjusted for breakage, reporting and collection lags, and possible tax evasion effects. Revenue from the retail wine tax would be dedicated to the TDA's wine programs. The costs to administer the wine tax are based on auditing approximately five percent of current permit holders authorized to sell wine at retail, either for on-premises or off-premises consumption. Most, if not all of them, would be required to pay this tax and submit monthly reports to the TDA. The probable fiscal implications of implementing the provisions of the bill during each of the first five years following passage are estimated as follows: Five Year Impact: Fiscal Year Probable Probable Revenue Change in Number Savings/(Cost) Gain/(Loss) from of State from General General Revenue Employees from Revenue Fund Fund FY 1997 0001 0001 1998 ($1,364,799) $859,000 14.2 1998 (1,600,299) 1,134,000 14.2 2000 (1,613,299) 1,147,000 14.2 2001 (1,623,299) 1,157,000 14.2 2002 (1,634,299) 1,168,000 14.2 Net Impact on General Revenue Related Funds: The probable fiscal implication to General Revenue related funds during each of the first five years is estimated as follows: Fiscal Year Probable Net Postive/(Negative) General Revenue Related Funds Funds 1998 ($505,799) 1999 (466,299) 2000 (466,299) 2001 (466,299) 2002 (466,299) Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. Source: Agencies: 551 Department of Agriculture 304 Comptroller of Public Accounts 458 Alcoholic Beverage Commission LBB Staff: JK ,BB ,RT