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.