Honorable Dustin Burrows, Chair, House Committee on Ways & Means
FROM:
John McGeady, Assistant Director Sarah Keyton, Assistant Director Legislative Budget Board
IN RE:
HB385 by Bohac (Relating to a sales tax exemption for certain items sold during a limited period.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB385, As Introduced: a negative impact of ($54,900,000) through the biennium ending August 31, 2021, if the bill takes immediate effect; or a negative impact of ($28,100,000) through the biennium ending August 31, 2021, if the effective date of the bill is September 1,2019.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2020
($26,800,000)
2021
($28,100,000)
2022
($29,400,000)
2023
($30,900,000)
2024
($32,300,000)
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2020
$0
2021
($28,100,000)
2022
($29,400,000)
2023
($30,900,000)
2024
($32,300,000)
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 and Special Districts
2020
($26,800,000)
($4,970,000)
($1,700,000)
($1,000,000)
2021
($28,100,000)
($5,210,000)
($1,790,000)
($1,050,000)
2022
($29,400,000)
($5,450,000)
($1,870,000)
($1,100,000)
2023
($30,900,000)
($5,730,000)
($1,960,000)
($1,160,000)
2024
($32,300,000)
($5,980,000)
($2,050,000)
($1,210,000)
The table above assumes the bill takes immediate effect. The table below assumes the effective date of the bill is September 1, 2019.
Fiscal Year
Probable Revenue Gain from General Revenue Fund 1
Probable Revenue Gain from Cities
Probable Revenue Gain from Transit Authorities
Probable Revenue Gain from Counties and Special Districts
2020
$0
$0
$0
$0
2021
($28,100,000)
($5,210,000)
($1,790,000)
($1,050,000)
2022
($29,400,000)
($5,450,000)
($1,870,000)
($1,100,000)
2023
($30,900,000)
($5,730,000)
($1,960,000)
($1,160,000)
2024
($32,300,000)
($5,980,000)
($2,050,000)
($1,210,000)
Fiscal Analysis
The bill would amend Chapter 151 of the Tax Code, relating to sales tax exemptions for certain items sold during a limited time period.
The bill would amend Section 151.326 (a) to increase the limit on the price of an item of clothing or footwear, and school supply or school backpack eligible for tax exemption during the Texas back-to-school sales tax holiday, from $100 to $200.
The bill would also add new Section 151.3271 to exempt from tax an e-reader, a personal computer, and a tablet computer during the sales tax holiday period provided by Sec. 151.326(a)(2), provided the sales price is less than $750 and the purchase is not over the internet. A "personal computer" would be defined as a laptop, desktop, tower computer system, or other personal computer that includes a central processing unit, random access memory, a storage device, a display monitor, and a keyboard. The bill would exclude smartphones and gaming consoles from the sales tax exemption.
The bill would take effect immediately upon enactment, assuming it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2019.
Methodology
Product listings by general retailers for items of clothing, footwear, school supplies and backpacks were examined to verify that significant numbers of such items are typically offered for sale at prices from $100 to $200. As most of such product offerings geared to students price below $100, it was assumed that increasing the per item price limit from $100 to $200 would probably result in a moderate increase in tax exempt purchases of such items -- thus the fiscal impact of the increase in the price limit was estimated as equal to 15 percent of the cost of the current sales tax holiday as implicit in the 2020-2021 Biennial Revenue Estimate and estimated in the 2019 edition of the Tax Exemption and Tax Incidence study.
Industry data on annual revenues from the sale of consumer electronics eligible for the exemption were apportioned to the state based on personal income, and reduced to estimate revenues from the sale of electronic devices not sold online. The result was reduced for the limited exemption period, multiplied by the sales tax rate, adjusted for potential effective dates for the bill of July 1, 2019 and September 1, 2019, and extrapolated through fiscal 2024.
If the bill were to take effect immediately, items of clothing, footwear, school supplies and backpacks, and electronics, would be eligible for exemption during the August 2019 tax holiday. In the event the bill fails to take immediate effect, the first exemption period would be in August 2020.
Local Government Impact
There would be a proportional loss of sales and use tax revenue from units of local government.