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