C.S.H.B. 109 78(R)    BILL ANALYSIS


C.S.H.B. 109
By: Chavez
Ways & Means
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

The United States Constitution exempts exports from state taxation and the
State of Texas has enacted statutes recognizing the exemption and provides
a means for obtaining a refund of state sales tax paid on exports. One of
those means is by a licensed customs broker issuing documentation
certifying that merchandise is an export. The statutes under which this
documentation is issued do not provide sufficient direction regarding when
and under what procedures this documentation may be issued certifying
merchandise as an export. Correcting these deficiencies could help ensure
the state's proper collection of taxes and benefit the economy of the
state by encouraging the sale of exports from Texas to Mexico. C.S.H.B.
109 modifies procedures under which licensed customs brokers operate,
including procedures under which they may issue documentation certifying
merchandise as an export, and provides for fines and penalties to be
imposed when procedures are not followed.  

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly
granted to the comptroller of public accounts in SECTION 2 (Section
151.1575, Tax Code) of this bill. 

ANALYSIS

C.S.H.B. 109 amends the Tax Code to establish procedures under which
licensed customs brokers (broker) must operate.  C.S.H.B. 109 amends the
licensing procedure by increasing the annual broker license fee from $100,
regardless of whether the broker has more than one place of business, to
$300 for each place of business.  The bill  increases the amount of the
bond or security required of each broker from $500, regardless of whether
the broker has more than one place of business, to $5,000, plus an
additional $1,000 for each place of business. The bill requires the broker
to report quarterly to the comptroller on the value of tangible personal
property and corresponding tax exempted, and of the tax refunded. The bill
requires the comptroller to maintain a password-protected website for use
by a customs broker to prepare the documentation to show exemption of
tangible personal property that has been exported.  The comptroller shall
use the information provided for enforcement purposes. The comptroller may
require that a customs broker pay to the comptroller the amount of any tax
refunded if the customs broker does not comply with the Act or the rules
adopted by the comptroller in relation to the refund of the tax. C.S.H.B.
109 also specifies conditions under which the comptroller may suspend or
revoke a broker's license. 

C.S.H.B. 109 provides that a broker or the authorized employee of a broker
may issue documentation to certify the delivery of tangible personal
property outside the Unites States only if the broker verifies the
delivery according to specified procedures.  The bill sets forth the
information that the documentation must include.  If the broker does not
comply with these procedures or with comptroller rules, the bill
authorizes the comptroller to require the broker to pay the amount of any
tax refunded or to pay the amount of the tax refunded and an additional
penalty that is equal to the amount of the refunded tax, but not less than
$500 or more than $5,000.  

C.S.H.B. 109  requires the Comptroller to charge $1 for each export stamp.
When an exemption is claimed because tangible personal property is
exported outside the United States, one form of proof of export is for the
person claiming the tax exemption to sign the proof of export
documentation. The bill also provides that the documentation include the
statement that "Providing false information to a customs broker is a Class
B misdemeanor." 
 C.S.H.B 109 provides that the  retailer required to file a tax report
with the Comptroller's office must show the amount of sales tax refunded
for items exported outside the United States after the retailer has
received the proof of export documentation. 

The bill clarifies that customs  brokers may provide documentation of
proof of export for a fee only if the documentation is provided in
accordance with Sec. 151.157 and rules adopted by the comptroller.  The
comptroller is required to revoke the license of a customs broker who
violates Sec. 151.712, and the customs broker may not apply for a new
license for one year after the license is revoked. 

EFFECTIVE DATE

January 1, 2004.

COMPARISON OF ORIGINAL TO SUBSTITUTE

The substitute adds provisions which: require the comptroller to maintain
a password-protected website for use by a customs broker to prepare the
documentation to show exemption of tangible personal property that has
been exported; provide that the comptroller may require that a customs
broker pay to the comptroller the amount of any tax refunded if the
customs broker does not comply with the Act or the rules adopted by the
comptroller in relation to the refund of the tax; require the Comptroller
to charge $1 for each export stamp; provide when an exemption is claimed
because tangible personal property is exported outside the United States,
one form of proof of export is for the person claiming the tax exemption
to sign the proof of export documentation; provide that the documentation
include the statement that "Providing false information to a customs
broker is a Class B misdemeanor."; provide that the retailer required to
file a tax report with the Comptroller's office must show the amount of
sales tax refunded for items exported outside the United States after the
retailer has received the proof of export documentation; and clarify that
customs  brokers may provide documentation of proof of export for a fee
only if the documentation is provided in accordance with Sec. 151.157 and
rules adopted by the comptroller.  The substitute also provides that the
comptroller is required to revoke the license of a customs broker who
violates Sec. 151.712, and the customs broker may not apply for a new
license for one year after the license is revoked. The substitute removes
a provision in Section 3 of the original bill.