SRC-MKV C.S.S.B. 1114 77(R)BILL ANALYSIS Senate Research CenterC.S.S.B. 1114 77R10763 CBH-FBy: Brown, J. E. "Buster" Finance 4/20/2001 Committee Report (Substituted) DIGEST 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 a transfer of title under the contract and the applicable federal acquisition regulations. C.S.S.B. 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 This bill does not expressly 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 151.355, as follows: Sec. 151.355. TAXABLE ITEMS USED IN PERFORMANCE OF SPACE FLIGHT CONTRACT. (a) Defines "space flight," "space flight contract" and "space vehicles." (b) Provides that the sale, lease, rental, or 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 the taxes imposed by this chapter if the item is included as an allowable direct or indirect item of cost under 48 C.F.R. Section 9904.418-30, 48 C.F.R. Section 52.216-7, 48 C.F.R. Subpart 31.2, or similar federal regulations, regardless of whether the contract is a cost-reimbursement contract. (c) Provides that this section does not apply to a part of direct or indirect costs allocated to a contract that is not a space flight contract. SECTION 2. (a) Effective date: September 1, 2003, if it receives a majority vote of the members elected to each house during the 78th Regular Session of the Texas Legislature. (b) Makes application of this Act prospective. SUMMARY OF COMMITTEE CHANGES Differs from original by adding the definition of "space flight" to SECTION 1 (Section 151.355, Tax Code) and by changing the wording in Section 151.355(b) from " included within the definition of an allowable direct or indirect item of cost" to "included as an allowable direct or indirect item of cost." Differs from original by changing the effective date from July 1, 2001 or October 1, 2001 to September 1, 2003, if it receives a majority vote of the members elected to each house during the 78th Regular Session of the Texas Legislature.