LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                              April 18, 2001
  
  
          TO:  Honorable Rene Oliveira, Chair, House Committee on Ways &
               Means
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB2582  by Chavez (Relating to customs brokers.), As
               Introduced
  
**************************************************************************
*  No significant fiscal implication to the State is anticipated.        *
**************************************************************************
  
The bill would amend Chapter 151 of the Tax Code to allow customs brokers
licensed by the Comptroller to issue documentation certifying that
delivery of tangible personal property was made to a point outside the
territorial limits of the United States only if the broker actually
watched the property cross the border of the United States, actually
watched the property being placed on a common carrier for delivery
outside the United States, or verified that the purchaser was a foreign
national transporting the property outside of the United States.

A customs broker would have to examine picture identification of the
purchaser, require the purchaser to produce the original receipt for the
property, require the purchaser to state the foreign country destination
of the property, require the purchaser to state the date and time when
the property would be expected to arrive in the foreign country, and
require the purchaser to sign a form stating the required information and
documentation was provided and notifying the purchaser of the
liabilities if the property was not properly exported or if a refund was
improperly obtained.

The Comptroller could suspend or revoke a license issued to a customs
broker if the broker did not comply with the requirements relating to
issuing documentation showing exportation of property or if the brokers
knowingly or intentionally issued documentation that was false to obtain
a refund of taxes paid on tangible personal property not exported or to
assist another person in obtaining a refund.  Further, the Comptroller
could require a customs broker to pay the amount of any tax refunded if
the broker did not comply with the documentation requirements.  In
addition to the amount of the refunded tax, the Comptroller could require
the customs broker to pay a penalty in an amount equal to two times the
amount of the refunded tax, but not less than $500 nor more than $5,000.
The requirement to pay the refunded tax and penalty would be in addition
to any civil or criminal penalty provided by law.

Under current law, proof of export may be shown in several ways.  One way
is through documentation provided by a U.S. Customs Broker.  If this
method is utilized, certain conditions must be met.

The bill would amplify on the existing provision of Section
151.307(b)(2)(B), relating to certification of delivery made to points
outside the territorial limits of the U.S., to include three possible
options for certification:  1) a visual verification of the property
crossing the border;  2) visual verification of property being placed on
a common carrier for delivery outside the U.S; or 3) verification that
the purchaser of the property is a foreign national transporting the
property to a destination outside of the U.S.

For the purposes of this analysis, it was assumed that, to the degree
that the third method is used, losses will occur due to the more lenient
nature of the certification process.  Presently, a customs broker is
responsible for verification; the bill would provide the option that the
purchaser state that the item is destined for an international location,
along with the expected date and time of arrival.  It is assumed that an
insignificant portion of these sales would become non-taxable as the more
lenient verification processes yielded some non-legitimate refund
claims.  Note:  Data on taxable retail sales in the South Texas and Upper
Rio Grande regions were obtained from Comptroller tax files.  It is
estimated that approximately $60 million in state and local sales and use
taxes is refunded annually to consumers for tangible personal property
legitimately exported from Texas to Mexico.

The bill would take effect September 1, 2001.
  
Local Government Impact
  
No significant fiscal implication to units of local government is
anticipated.
  
  
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, SD, WP, SM