LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
  
                              April 24, 2001
  
  
          TO:  Honorable Rene Oliveira, Chair, House Committee on Ways &
               Means
  
        FROM:  John Keel, Director, Legislative Budget Board
  
       IN RE:  HB2866  by Sadler (Relating to exempting boats and motors
               purchased exclusively for rental from the sales and use
               tax on boats and motors.), As Introduced
  
**************************************************************************
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  HB2866, As Introduced: a negative impact of $(1,569,000) through      *
*  the biennium ending August 31, 2003, if the effective date of the     *
*  bill is June 1, 2001; and a negative impact of $(1,337,000)           *
*  through the biennium ending August 31, 2003, if the effective date    *
*  of the bill is September 1, 2001.                                     *
**************************************************************************
  
The following table assumes an effective date of June 1, 2001.
  
All Funds, Five-Year Impact:
  
         *****************************************************
         * Fiscal Year    Probable Revenue Gain/(Loss) from   *
         *                      General Revenue Fund          *
         *                              0001                  *
         *      2001                               $(169,000) *
         *      2002                                (692,000) *
         *      2003                                (708,000) *
         *      2004                                (727,000) *
         *      2005                                (747,000) *
         *      2006                                (769,000) *
         *****************************************************
  
The following table assumes an effective date of September 1, 2001.
  
         *****************************************************
         * Fiscal Year    Probable Revenue Gain/(Loss) from   *
         *                      General Revenue Fund          *
         *                              0001                  *
         *      2002                               $(629,000) *
         *      2003                                (708,000) *
         *      2004                                (727,000) *
         *      2005                                (747,000) *
         *      2006                                (769,000) *
         *****************************************************
  
Fiscal Analysis
  
The bill would amend Chapter 160 of the Tax Code to exempt from the boat
and boat motor sales and use tax the purchase of a boat or boat motor by
a purchaser who would use the boat or boat motor exclusively for rental
to others.

The bill would take effect immediately upon enactment, assuming that it
received the requisite two-thirds majority votes in both houses of the
Legislature.  Otherwise, it would take effect September 1, 2001.
  
  
Methodology
  
Currently, boats and boat motors purchased for rental are subject to the
boat and motor sales and use tax, while rentals are taxed under the
limited sales and use tax.  This bill would allow purchasers of boat and
boat motors for rental to make their purchases tax free and continue to
report taxable rentals under the limited sales and use tax.

Data were obtained from the U.S. Census Bureau on the number of
establishments in Texas renting boats and motors.  It is estimated that
approximately $568,000 in boat and boat motor sales and use tax was paid
during calendar 1997 for the purchase of boats and motors qualifying for
exemption under the provisions of the bill.  The estimated fiscal impact
was projected through 2006 and adjusted for effective date.
  
  
Local Government Impact
  
Local units of government would have a corresponding fiscal impact from
sales tax revenues, as indicated in the tables above.
  
  
Source Agencies:   304   Comptroller of Public Accounts
LBB Staff:         JK, SD, SM