LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                            February 28, 2001
  
  
          TO:  Honorable Rene Oliveira, Chair, House Committee on Ways &
               Means
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB375  by Flores (Relating to exemptions from the sales
               tax.), As Introduced
  
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*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  HB375, As Introduced: a negative impact of $(38,604,000) through      *
*  the biennium ending August 31, 2003, if the effective date of the     *
*  bill is July 1, 2001; and a negative impact of $(22,810,000)          *
*  through the biennium ending August 31, 2003, if the effective date    *
*  of the bill is October 1, 2001.                                       *
**************************************************************************
  
The following table assumes an effective date of July 1, 2001.
  
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                                                       *
*  2001      $(5,487,000)              $0              $0              $0 *
*  2002      (16,105,000)     (2,908,000)     (1,122,000)       (344,000) *
*  2003      (17,012,000)     (3,072,000)     (1,185,000)       (363,000) *
*  2004      (17,991,000)     (3,248,000)     (1,253,000)       (384,000) *
*  2005      (19,013,000)     (3,433,000)     (1,325,000)       (406,000) *
*  2006      (20,155,000)     (3,639,000)     (1,404,000)       (431,000) *
***************************************************************************
  
The following table assumes an effective date of October 1, 2001.
  
***************************************************************************
*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                                                       *
*  2002      $(5,798,000)              $0              $0              $0 *
*  2003      (17,012,000)     (3,072,000)     (1,185,000)       (363,000) *
*  2004      (17,991,000)     (3,248,000)     (1,253,000)       (384,000) *
*  2005      (19,013,000)     (3,433,000)     (1,325,000)       (406,000) *
*  2006      (20,155,000)     (3,639,000)     (1,404,000)       (431,000) *
***************************************************************************
  
Fiscal Analysis
  
The bill would amend Chapter 151 of the Tax Code to exempt certain school
supplies from the limited sales and use tax if the items were required
for classroom use by a student in a public or private elementary or
secondary school, had a value of less than $75, and were purchased during
the three-day period starting with the first Friday of August.

A retailer would not be required to obtain an exemption certificate
except in instances where the quantity purchased would indicate a
non-school usage.  The bill would allow the repeal of the exemption for
school supplies by local taxing jurisdictions as it would relate to their
local sales taxes, as provided by Chapter 326 of the Tax Code.

The bill would take effect July 1, 2001 if it received the requisite
two-thirds majority votes in both houses of the Legislature.  Otherwise,
it would take effect October 1, 2001.
  
  
Methodology
  
Data on the sale of school supplies (including backpacks) and textbooks
were obtained from a variety of sources, both public and private,
including the U.S. Census Bureau.  The data were adjusted for the
appropriate price range and time period, multiplied by the state sales
tax rate, adjusted for the potential effective dates of July 1, 2001 and
October 1, 2001, and extrapolated through fiscal 2006.  The fiscal
impacts on units of local government were estimated proportionally.

Note:  This analysis assumes that a portion of the sales tax generated by
college textbooks would be exempted by this bill, as well as a portion
of the sales tax collected on books sold at non-college, public
bookstores.
  
  
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, SD, WP, SM