Honorable Harvey Hilderbran, Chair, House Committee on Ways & Means
FROM:
John S O'Brien, Director, Legislative Budget Board
IN RE:
HB744 by Raymond (Relating to exemptions from the sales tax for certain business entities during a limited period.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB744, As Introduced: a negative impact of ($112,000,000) through the biennium ending August 31, 2013.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2012
($40,000,000)
2013
($72,000,000)
2014
($107,000,000)
2015
($143,000,000)
2016
($180,000,000)
Fiscal Year
Probable Revenue (Loss) from General Revenue Fund 1
Probable Revenue (Loss) from Cities
Probable Revenue (Loss) from Transit Authorities
Probable Revenue (Loss) from Counties
2012
($40,000,000)
($7,800,000)
($2,400,000)
($900,000)
2013
($72,000,000)
($14,100,000)
($4,400,000)
($1,600,000)
2014
($107,000,000)
($21,000,000)
($6,500,000)
($2,400,000)
2015
($143,000,000)
($28,000,000)
($8,700,000)
($3,100,000)
2016
($180,000,000)
($35,300,000)
($11,000,000)
($4,000,000)
Fiscal Year
Probable Revenue (Loss) from Other Special Districts
2012
($500,000)
2013
($900,000)
2014
($1,300,000)
2015
($1,700,000)
2016
($2,200,000)
Fiscal Analysis
This bill would amend Subchapter H, Chapter 151, Tax Code, by adding a new Section 151.3411 to provide for sales tax exemption of certain computer equipment by certain businesses.
"Computer equipment" would be defined to include a desktop or notebook computer and related equipment, including a monitor or other display device, a printer which may be capable of other functions, and other hardware or networking equipment for computers such as adapters, modems, servers, routers, and other equipment associated with internet access. Computer equipment eligible for the exemption and for which a refund or credit could be claimed by an eligible business is equipment that is: (1) for the exclusive use and benefit of the business, (2) necessary for the operation of the business, (3) for the replacement of computer equipment for which the business paid the sales and use tax imposed by Chapter 151, Tax Code, and (4) purchased, leased, rented, or used within the fifth anniversary of a business' initial qualification as an eligible small business.
To be eligible for exemption a business must be a small business engaged in business in this state and would be required to: (1) create on or after September 1, 2011 at least 25 qualifying jobs in the county in which the business is principally located, (2) invest at least $10 million in capital investments in this state, and (3) pay the sales and use tax imposed on the purchase, lease, rental, or use of computer equipment that is necessary for the operation of the business and for the exclusive use and benefit of the business.
The comptroller would be required to adopt rules for implementation of the new section, including rules relating to: (1) qualification of a small business for an exemption, (2) determination of the date of initial qualification as an eligible small business, and (3) circumstances under which computer equipment is considered to replace other computer equipment.
The bill would take effect September 1, 2011.
Methodology
Estimates were developed using a forecast of the number of firms eligible as a small business, adjusting to reflect the portion that would meet the qualifying jobs and capital investment criteria, and applying the state sales tax rate to forecast expenditures on eligible computer equipment. The effects on units of local government were estimated proportionally.
Local Government Impact
There would be a proportionate loss of sales tax revenue to local taxing units as reflected in the above tables.