SRC-VRA C.S.S.B. 1262 78(R)BILL ANALYSIS


Senate Research CenterC.S.S.B. 1262
78R12375 CBH-DBy: Armbrister
Intergovernmental Relations
5/1/2003
Committee Report (Substituted)


DIGEST AND PURPOSE 

Currently, major accounting firms are promoting a concept called Texas
Purchasing Companies" to extract sales tax receipts from Texas cities.
The Texas Purchasing Company is an office operation that is set up with
little more than a desk and a telephone through which a company funnels
its sales tax collections.  These companies use the incentive of bringing
additional sales tax revenues to cities to entice them to rebate a large
portion that sales tax back to the Texas Purchasing Company.  Meanwhile,
the cities that are providing the infrastructure support to the underlying
companies are losing those sales tax revenues to other cities that do not
need to provide municipal services.   C.S.S.B. 1262 prohibits
municipalities or development corporations from rebating sales and use
taxes to provide an economic incentive to persuade a person to relocate an
existing business from a different municipality in this state. 

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to
a state officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 380, Local Government Code, by adding Section
380.004, as follows: 
 
Sec. 380.004.  SALES AND USE TAX REBATES.  (a)  Prohibits a municipality
or a development corporation created under the Development Corporation Act
of 1979 (Article 5190.6, V.T.C.S.) from rebating sales and use taxes to
provide an economic incentive to persuade a person to relocate all or part
of an existing business from a different municipality in this state. 
 
(b) Provides that for purposes of this section, the establishment of a new
business in a municipality is considered to be a relocation of part of an
existing business if the existing business continues to conduct business
in the original municipality, the existing business owns or operates the
new business or the new business is an affiliate or subsidiary of the
original business, the new business performs services that are essential
to the existing business, and certain conditions are met. 

SECTION 2.Effective date:  September 1, 2003.
  Makes application of this Act prospective.