| TO: | Honorable Ron Wilson, Chair, House Committee on Ways & Means |
| FROM: | John Keel, Director, Legislative Budget Board |
| IN RE: | SB823 by Fraser (Relating to administration of the sales and use tax and compliance with the Streamlined Sales and Use Tax Agreement.), As Engrossed |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2004 | $1,489,000 |
| 2005 | $1,871,000 |
| 2006 | $1,955,000 |
| 2007 | $2,038,000 |
| 2008 | $2,123,000 |
| Fiscal Year | Probable Revenue Gain/(Loss) from GENERAL REVENUE FUND 1 |
Probable Revenue Gain/(Loss) from Cities |
Probable Revenue Gain/(Loss) from Transit Authorities |
Probable Revenue Gain/(Loss) from CountiesSpecial Districts |
|---|---|---|---|---|
| 2004 | $1,489,000 | $247,000 | $89,000 | $31,000 |
| 2005 | $1,871,000 | $344,000 | $124,000 | $43,000 |
| 2006 | $1,955,000 | $360,000 | $130,000 | $45,000 |
| 2007 | $2,038,000 | $375,000 | $135,000 | $47,000 |
| 2008 | $2,123,000 | $391,000 | $141,000 | $49,000 |
The bill would amend Chapter 142 of the Tax Code to comply with the Streamlined Sales and Use Tax Agreement as amended and adopted on November 12, 2002 by the Streamlined Sales Tax Project, of which Texas is a participating state.
The Streamlined Sales and Use Tax Agreement is a multi-state effort to simplify and modernize sales and use tax administration within the member states to reduce the burden of tax compliance. The bill would authorize the Comptroller to enter into the agreement on behalf of the state of Texas if the Governor, the Lieutenant Governor, the Speaker of the House of Representatives, and the Comptroller unanimously agreed that it would be in the state's best interest to be a signatory to the agreement.
To comply with the Streamlined Sales and Use Tax Agreement, the bill would amend Chapter 151 of the Tax Code to require a change in the sales tax rate to become effective on the first day of a calendar quarter and to adopt the uniform definition of "food products" and "prepared food". Because of the latter definition change, the bill would make conforming changes to provisions relating to the exemption for certain uses of gas and electricity.
Chapters 321 and 323 of the Tax Code, relating to municipal and county sales taxes, respectively, would be amended to specify the sale of a taxable service is consumed at the location at which the service is performed or otherwise delivered. This would change the consummation of sales for services from the point of origin to the point of destination. Provisions in Chapter 151 would be amended to require sales tax permit holders to collect any applicable local use taxes even if the permit holder were not engaged in business in the local jurisdiction into which the taxable items were shipped or delivered.
The Comptroller would be required to conduct a study of the costs to political subdivisions of changing sourcing laws relating to the sale of tangible personal property to comply with the streamlined sales and Use Tax Agreement.
Section 151.326(c) and Chapter 326 of the Tax Code, which allow local taxing authorities to repeal the exemption for clothing and footwear for a limited time, would be repealed.
Sections 151.103(d) and 151.202(c) of the Tax Code as added by the bill and the changes to Sections 321.203 and 323.203 of the Tax Code would take effect July 1, 2004. Otherwise, the bill would take effect October 1, 2003.
The bill would make various changes to the Tax Code to comply with the Streamlined Sales and Use Tax Agreement. The changes, however, would not make substantial changes to the way in which most state and local sales and use taxes are collected and administered in Texas.
With regard to Internet transactions, the bill would simplify tax collection procedures for retailers that currently do not remit tax for sales conducted over the Internet. This would encourage some retailers to begin collecting and remitting tax and would have a positive effect on sales tax revenues.
| Source Agencies: | 304 Comptroller of Public Accounts
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| LBB Staff: | JK, SD, WP, SM
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