LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 76th Regular Session
Revision 1
April 16, 1999
TO: Honorable Bill Ratliff, Chair, Senate Committee on Finance
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB341 by Ogden (relating to taxing the sale, use, or
consumption of Internet access service), Committee Report
1st House, Substituted
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* Estimated Two-year Net Impact to General Revenue Related Fundsfor *
* SB341, Committee Report 1st House, Substituted: a negative impact *
* of $(22,045,000) through the biennium ending August 31, 2001, if *
* the effective date is July 1, 1999; and a negative impact of *
* $(19,673,000) through the biennium ending August 31, 2001, if the *
* effective date is October 1, 1999. *
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The following fiscal implications assume an effective date of July 1,
1999.
All Funds, Five-Year Impact:
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*Fiscal Probable Probable Probable Probable *
* Year Revenue Revenue Revenue Revenue *
* Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to *
* General Revenue Cities Transit Counties/SPDs *
* Fund Authorities *
* 0001 *
* 1999 $(719,000) $0 $0 $0 *
* 2000 (9,919,000) (1,557,000) (611,000) (189,000) *
* 2001 (11,407,000) (1,990,000) (781,000) (241,000) *
* 2002 (13,118,000) (2,288,000) (898,000) (277,000) *
* 2003 (15,085,000) (2,631,000) (1,033,000) (319,000) *
* 2004 (17,348,000) (3,026,000) (1,188,000) (366,000) *
***************************************************************************
The following fiscal implications assume an effective date of October 1,
1999.
***************************************************************************
*Fiscal Probable Probable Probable Probable *
* Year Revenue Revenue Revenue Revenue *
* Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to *
* General Revenue Cities Transit Counties/SPDs *
* Fund Authorities *
* 0001 *
* 2000 $(8,266,000) $(1,298,000) $(510,000) $(157,000) *
* 2001 (11,407,000) (1,990,000) (781,000) (241,000) *
* 2002 (13,118,000) (2,288,000) (898,000) (277,000) *
* 2003 (15,085,000) (2,631,000) (1,033,000) (319,000) *
* 2004 (17,348,000) (3,026,000) (1,188,000) (366,000) *
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Fiscal Analysis
The bill would amend the Tax Code to specifically include Internet access
as a taxable service under the sales tax. The bill would define
Internet access services and exempt from taxation the first $25 of
monthly charges.
"Internet access" would not include existing taxable services, unless the
taxable service was provided in conjunction with (and merely incidental
to) the provision of Internet access service.
The exemption would apply without regard to whether the access was
bundled with another service, including any of those services currently
taxed under the sales tax; and it would apply without regard to the
billing period used by the service provider. The exemption would apply
to the total sales price for Internet access, whether charged in a
lump-sum or separately billed for each user.
Methodology
An estimate of state sales tax remitted on Internet access service was
developed using external sources of consumer data and Comptroller tax
files. The resulting figure was adjusted to reflect Internet access tax
revenues stemming from monthly charges not exceeding $25 and
extrapolated through fiscal 2004. Fiscal 1999 and 2000 were adjusted
for effective date, as appropriate. The impact on units of local
government was estimated proportionally.
Local Government Impact
Local units of government would have a corresponding fiscal impact from
sales tax revenues, as indicated in the table above.
Source Agencies: 304 Comptroller of Public Accounts
LBB Staff: JK, BB, BR, SM