SRC-JXG S.B. 1056 76(R)   BILL ANALYSIS


Senate Research Center   S.B. 1056
76R5948 CBH-DBy: Carona
Finance
4/9/1999
As Filed


DIGEST 

In 1987, the Texas Legislature broadened the manufacturing exemption to
include a sales tax exemption for purchases on manufacturing equipment.
Before this sale tax exemption, telecommunication manufacturers were being
taxed at a substantially higher rate than other industries. Today, Texas
faces competition for investment in telecommunications equipment. Over the
last few years, there has been an increase in demand by consumers and
businesses for more affordable, advanced, and accessible
telecommunications. The state's current tax structure needs to be updated
to keep pace with rapidly advancing technology, and the changes
attributable to deregulation. S.B.1056 would exempt certain
telecommunications equipment from sale and use taxes. 

PURPOSE

As proposed, S.B. 1056 exempts certain telecommunications machinery from
sale and use taxes. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Chapter 151H, Tax Code, by adding Section 151.3235, as
follows: 

Sec. 151.3235. CERTAIN TELECOMMUNICATIONS MACHINERY AND EQUIPMENT. Defines
"Internet," "Internet service," and "telecommunications provider." Provides
that machinery, equipment, operating software, and replacement parts and
accessories used to provide telecommunications service or Internet service
are exempt from taxes imposed by this chapter, if the machinery, equipment,
operating software, replacement parts or accessories are sold, leased, or
rented to, or stored, used, or consumed by a telecommunications provider in
the conduct of a telecommunications service or Internet service business,
or a subsidiary, affiliate, partner, or co-venturer of the
telecommunications provider who uses  the equipment to upgrade systems to
allow for the provision of the telecommunications service or Internet
service. Provides that this exemption provided by this section does not
include office furniture and related office equipment. 

SECTION 2. (a) Provides that this Act takes effect on the first day of the
first calendar quarter beginning on or after the earliest date that it may
take effect under Section 39, Article III, Texas Constitution.  

 (b) Makes application of this Act prospective.

SECTION 3. Emergency clause.