LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 4, 2001
TO: Honorable Rene Oliveira, Chair, House Committee on Ways &
Means
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB3650 by Thompson (Relating to the taxation of tobacco
products other than cigars and cigarettes.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB3650, As Introduced: positive impact of $30,402,700 through the *
* biennium ending August 31, 2003. *
**************************************************************************
General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $10,805,700 *
* 2003 19,597,000 *
* 2004 19,532,000 *
* 2005 19,495,000 *
* 2006 19,436,000 *
****************************************************
All Funds, Five-Year Impact:
*****************************************************
* Fiscal Year Probable Revenue Gain/(Loss) from *
* General Revenue Fund *
* 0001 *
* 2002 $10,805,700 *
* 2003 19,597,000 *
* 2004 19,532,000 *
* 2005 19,495,000 *
* 2006 19,436,000 *
*****************************************************
Fiscal Analysis
The bill would increase the tax rate for tobacco products other than
cigars to 40 percent from 35.213 percent.
Further, the bill would amend Chapter 155 of the Tax Code (Cigars and
Tobacco Products Tax) by adding a definition for the "purchase price" of
the tobacco products covered by this chapter, and by changing the taxable
base for tobacco products other than cigars (currently "manufacturer's
list price, exclusive of any trade discount, special discount, or deal")
to "purchase price" as defined by this bill.
In addition, the bill would change the point at which the tax on tobacco
products other than cigars is due. Under current law, the tax is due
when a "permit holder receives" these tobacco products for the purpose of
making a first sale in this state. Under this bill, the tax would be
due when a "distributor in this state receives or possesses" the tobacco
products for the purpose of making a first sale in this state.
Since there is no effective date in the bill, it is assumed that the
effective date would be 90 days after the end of the 77th regular
legislative session.
Methodology
The change in the taxable base, from manufacturer's list price to the
narrower "purchase price," as defined by this bill, would reduce tax
collections to a limited degree. However, this change would in effect
obviate the tax collection challenges that stem from the use of the term,
"manufacturer's list price" in the current Tax Code.
The change from "permit holder" to "distributor in this state" would be
expected to result in the loss of taxes paid by distributors located
outside Texas who sell these products to Texas retailers. There
currently are 46 such distributors permitted with the state.
The fiscal impact of the tax rate increase is relative to the revenue as
anticipated by the 2002-2003 Biennial Revenue Estimate, with adjustments
made for potential taxpayer compliance problems and collection lags.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 304 Comptroller of Public Accounts
LBB Staff: JK, SD, WP