HBA-AMW S.B. 1114 77(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 1114 By: Brown, J. E. "Buster" Ways & Means 5/7/2001 Engrossed BACKGROUND AND PURPOSE Currently, some indirect purchases of tangible personal property under contracts with the federal government for space flight activities are subject to sales and use taxes because there is no "resale" to the federal government. This has been the interpretation although title to tangible personal property passes directly to the federal government because a sale includes transfer of title under the contract and the applicable federal acquisition regulations. Senate Bill 1114 clarifies the applicability of the exemption with respect to tangible personal property used or consumed in the performance of federal space flight contracts and extends similar treatment to taxable services used in the performance of such contracts. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS Senate Bill 1114 amends the Tax Code to provide that the sale, lease, rental, storage, use, or consumption of a taxable item that is used or consumed by a person in the performance of a space flight contract is exempt from limited sales, excise, and use taxes (exempt item) and that the person who uses or consumes the item may claim a refund, if the exempt item is included as an allowable direct or indirect item of cost under regulations relating to the federal acquisition regulations system or similar federal regulations, regardless of whether the contract is a cost-reimbursement contract. The bill authorizes a person who is eligible to claim a refund to apply to the comptroller of public accounts (comptroller) not later than March 31 for a refund of taxes paid during the preceding calendar year on tax exempt items. The bill requires the comptroller to determine the total amount of valid claims for refunds of taxes paid during the preceding calendar year and, not later than May 30, send to each applicant who submits a valid refund claim the full amount of the refund if the total amount of valid claims for refunds of taxes paid during the preceding calendar year does not exceed $800,000 or a portion of that refund if the total amount of valid claims for refunds of taxes paid during the preceding calendar year exceeds $800,000. The bill establishes a formula for determining the amount of a refund for which the total amount of valid claims during the preceding year exceeds $800,000. The bill provides that a valid refund claim draws interest, beginning on the later of March 31 of the year in which the claim is filed or the 61st day after the date the claim is filed, at the prime rate plus one percent, as published in the Wall Street Journal on the first day of each calendar year that is not a Saturday, Sunday, or legal holiday. The bill specifies that this exemption does not apply to a part of direct or indirect costs allocated to a contract that is not a space flight contract. EFFECTIVE DATE September 1, 2003, if the Act receives a majority vote of the members elected to each house during the 78th Legislature, Regular Session, 2003.