LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 76th Regular Session
May 21, 1999
TO: Honorable Rene Oliveira, Chair, House Committee on Ways &
Means
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB441 by Ellis, Rodney (relating to the application of
the sales and use tax to certain services), Committee
Report 2nd House, Substituted
**************************************************************************
* Estimated Two-year Net Impact to General Revenue Related Fundsfor *
* SB441, Committee Report 2nd House, Substituted: negative impact *
* of $(61,251,000) through the biennium ending August 31, 2001. *
**************************************************************************
General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2000 $(16,946,000) *
* 2001 (44,305,000) *
* 2002 (73,589,000) *
* 2003 (130,547,000) *
* 2004 (247,229,000) *
****************************************************
All Funds, Five-Year Impact:
***************************************************************************
*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 $(16,946,000) $(2,634,000) $(1,034,000) $(319,000) *
* 2001 (44,305,000) (7,584,000) (2,978,000) (918,000) *
* 2002 (73,589,000) (12,519,000) (4,916,000) (1,516,000) *
* 2003 (130,547,000) (21,633,000) (8,495,000) (2,620,000) *
* 2004 (247,229,000) (40,057,000) (15,729,000) (4,850,000) *
***************************************************************************
Fiscal Analysis
The bill would amend Chapter 151 of the Tax Code to specifically include
Internet access as a taxable service under the sales tax. An amount not
to exceed the first $25 of a monthly charge for Internet access service
would be exempt from taxation, effective October 1, 1999.
"Internet access service" 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.
The bill also would exempt information services and data processing
services from the sales tax. The exemption would be phased in over a
number of years. On or after January 1, 2000 and before October 1, 2000,
these services would be 20 percent exempt. Beginning October 1, 2000
and for the next twelve months, services would be 40 percent exempt. The
next two twelve-month periods the services would be 60 percent and 80
percent exempt, respectively. On and after October 1, 2003, these
services would be fully exempt from sales tax.
The term telecommunications service would be defined to not include
Internet access service. The definition of "magazine" would be amended
to delete a reference to information services, which would be made
exempt from sales tax by this bill. The sections of Chapter 151
defining data processing services and information services would be
repealed on October 1, 2003.
Methodology
The fiscal implications of exempting Internet access service and data
processing and information services were developed using external
sources of data (both public and private) and Comptroller tax files.
Sales taxes remitted on Internet access services were adjusted to
reflect only those tax revenues stemming from monthly charges not
exceeding $25, extrapolated through 2004, and adjusted for an effective
date of October 1, 1999. Similarly, an estimate of data processing and
information service revenue was projected through 2004 and adjusted for
the exemption phase-in schedule. The estimated impacts on the General
Revenue Fund 0001 for the Internet access and data
processing/information service provisions were then summed. The fiscal
impacts on units of local government were 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