| TO: | Honorable Ron Wilson, Chair, House Committee on Ways & Means |
| FROM: | John Keel, Director, Legislative Budget Board |
| IN RE: | HB109 by Chavez (Relating to customs brokers.), As Introduced |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2004 | ($2,164,000) |
| 2005 | ($3,880,000) |
| 2006 | ($4,048,000) |
| 2007 | ($4,220,000) |
| 2008 | ($4,394,000) |
| Fiscal Year | Probable Revenue Gain/(Loss) fromGENERAL REVENUE FUND 1 |
Probable Revenue Gain/(Loss) fromCities | Probable Revenue Gain/(Loss) fromTransit Authorities | Probable Revenue Gain/(Loss) fromCounties/Special Districts |
|---|---|---|---|---|
| 2004 | ($2,164,000) | ($341,000) | ($123,000) | ($43,000) |
| 2005 | ($3,880,000) | ($714,000) | ($257,000) | ($89,000) |
| 2006 | ($4,048,000) | ($745,000) | ($268,000) | ($93,000) |
| 2007 | ($4,220,000) | ($777,000) | ($280,000) | ($97,000) |
| 2008 | ($4,394,000) | ($808,000) | ($291,000) | ($101,000) |
The bill would amend Chapter 151 of the Tax Code to establish under what conditions a customs broker may issue documentation certifying that delivery of tangible personal property was made to a point outside the territorial limits of the United States. Documentation could be issued if: the broker watched the property cross the border of the United States, watched the property being placed on a common carrier for delivery outside the United States, or verified that the purchaser was transporting the property to a destination outside the United States.
To use the third method for issuing documentation, a customs broker would have to examine picture identification of the purchaser, require the purchaser to produce the original receipt for the property, require the purchaser to state the foreign country destination of the property, require the purchaser to state the date and time when the property would be expected to arrive in the foreign country, require the purchaser to sign a form stating the required information and documentation was provided and notify the purchaser of the liabilities if the property was not properly exported or if a refund was improperly obtained, and require the purchaser to produce proper travel documentation.
Customs brokers would have to pay to the Comptroller an annual license fee of $300 for each location from which the broker intended to issue exemption certificates. In the event of a license being issued, required bond or security would be $5,000, plus an additional $1,000 for each place of business. Brokers would have to report quarterly to the Comptroller the total value of tangible personal property and the total amount of corresponding tax for which the broker issued exemption certificates and the total amount of tax refunded in accordance with exemption certificates.
The Comptroller could suspend or revoke a license issued to a customs broker if the broker did not comply with the requirements relating to issuing documentation showing exportation of property, or if the broker knowingly or intentionally issued documentation that was false to obtain a refund of taxes paid on tangible personal property not exported or to assist another person in obtaining a refund.
The Comptroller could require a customs broker to pay the amount of any tax refunded if the broker did not comply with the documentation requirements. In addition to the amount of the refunded tax, the Comptroller could require the customs broker to pay a penalty in an amount equal to the amount of the refunded tax, but not less than $500 nor more than $5,000.
The bill would take effect January 1, 2004.
Under current law, proof of export may be shown in several ways. One acceptable method is documentation provided by a U.S. Customs Broker. If this method is used, certain conditions must be met.
The bill would create provisions authorizing three possible options for customs brokers for certification of delivery of goods made to points outside the territorial limits of the U.S. The options would include: 1) a visual verification of the property crossing the border; 2) visual verification of property being placed on a common carrier for delivery outside the U.S.; or 3) verification that the purchaser of the property is a foreign national transporting the property to a destination outside of the U.S.
For the purposes of this analysis, it was assumed that, to the degree that the third method would be used, losses would occur due to the more lenient nature of the certification process. Presently, a customs broker is responsible for verification. The bill would provide the option that the purchaser state that the item was destined for an international location, along with the expected date and time of arrival.
Data on taxable retail sales in the counties along Texas' border with Mexico were obtained from Comptroller tax files. It was assumed that one percent of these sales would become non-taxable as the more lenient verification processes yielded some non-legitimate refund claims. This product was then multiplied by the state sales tax rate and adjusted for the effective date and the expiration date. The fiscal implications on units of local government were estimated proportionally.
There are approximately 800 customs brokers locations currently in operation. This amount was multiplied by the $300 annual license fee required by the bill and added to the sales tax implications to determine the final revenue loss to General Revenue Fund 0001.
| Source Agencies: | 304 Comptroller Of Public Accounts
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| LBB Staff: | JK, JO, SD, WP, SM
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