LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session March 23, 2001 TO: Honorable Rodney Ellis, Chair, Senate Committee on Finance FROM: John Keel, Director, Legislative Budget Board IN RE: SB1450 by Lindsay (Relating to the collection and enforcement of taxes; providing penalties.), As Introduced ************************************************************************** * No significant fiscal implication to the State is anticipated. * ************************************************************************** The bill would amend Chapter 111 of the Tax Code to allow the Comptroller to recharacterize transactions, activities, or relationships and treat them in a manner consistent with their underlying nature if the Comptroller determined the actions or relationships did not have a significant business purpose or lacked economic substance. The bill would amend Chapter 151 of the Tax Code to define the terms, "person" and "representative" and to codify Comptroller policy on physical presence and indirect ownership of property, as those terms and concepts relate to the administration of the state sales and use tax. The bill would clarify standards for determining if a retailer was engaged in business in this state as that concept relates to the state use tax. The bill would take effect September 1, 2001. Methodology The Comptroller would be granted the authority to recharacterize actions or relationships that did not have a significant business purpose or lack economic substance, but which were made for the purpose of tax avoidance. This recharacterization could result in increased tax liability related to those actions or relationships, which could produce some gain to the state and units of local government. Given the magnitude of current sales tax revenue, it is not anticipated that the provisions of this bill would result in a significant impact in state sales tax revenue. 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, SM