LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session April 23, 2001 TO: Honorable Rodney Ellis, Chair, Senate Committee on Finance FROM: John Keel, Director, Legislative Budget Board IN RE: SB1678 by Jackson (Relating to exempting certain electronic information services from the sales and use tax.), Committee Report 1st House, as amended ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * SB1678, Committee Report 1st House, as amended: a negative impact * * of $(268,000) through the biennium ending August 31, 2003, if the * * effective date of the bill is July 1, 2001; and a negative impact * * of $(237,000) through the biennium ending August 31, 2003, if the * * effective date of the bill is October 1, 2001. * ************************************************************************** The following table assumes an effective date of July 1, 2001. All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Probable Probable Probable * * Year Revenue Revenue Revenue Revenue * * Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to * * General Revenue Cities Transit Counties/SPDs * * Fund Authorities * * 0001 * * 2001 $(10,000) $0 $0 $0 * * 2002 (127,000) (23,000) (9,000) (3,000) * * 2003 (131,000) (24,000) (9,000) (3,000) * * 2004 (11,000) (4,000) (2,000) (1,000) * * 2005 0 0 0 0 * * 2006 0 0 0 0 * *************************************************************************** The following table assumes an effective date of October 1, 2001. *************************************************************************** *Fiscal Probable Probable Probable Probable * * Year Revenue Revenue Revenue Revenue * * Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to * * General Revenue Cities Transit Counties/SPDs * * Fund Authorities * * 0001 * * 2002 $(106,000) $(17,000) $(7,000) $(2,000) * * 2003 (131,000) (24,000) (9,000) (3,000) * * 2004 (11,000) (4,000) (2,000) (1,000) * * 2005 0 0 0 0 * * 2006 0 0 0 0 * *************************************************************************** Fiscal Analysis The bill would add Section 151.3511 to the Tax Code to exempt the sale of an information service from the state sales and use tax if the service delivered its information by fax or electronic mail over the Internet, did not contain any advertisements, was issued not more than once each business day, cost less than $500 for a yearly subscription, and did not have more than 750 subscribers. The newly-created Section 151.3511 would expire August 31, 2003. The bill would take effect July 1, 2001, assuming that it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect October 1, 2001. Methodology Data on the sale of information services were gathered from public and private sources, including Comptroller tax files. Sales were adjusted for the specified information services, multiplied by the state sales tax rate, adjusted for potential effective dates of June 1, 2001 and October 1, 2001, and extrapolated through the projection period. The fiscal impact on units of local government were estimated proportionally. Note: Currently, 20 percent of the value of information services is exempted from the state sales and use tax under Section 151.351 of the Tax Code. Note: The fiscal implications in 2004 reflect state sales taxes collected during August 2003; local impacts reflect taxes collected in July and August, 2003. 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