Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB4772 by Thierry (Relating to an excise tax on certain nontobacco nicotine products; providing penalties and creating criminal offenses; imposing a tax.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB4772, As Introduced : a positive impact of $2,130,266 through the biennium ending August 31, 2025.
Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of ($2,521,000) for the 2024-25 biennium. Any loss to the Property Tax Relief Fund must be made up with an equal amount of General Revenue to fund the Foundation School Program.
General Revenue-Related Funds, Five- Year Impact:
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2024
$891,000
2025
$1,239,266
2026
$2,794,194
2027
$2,657,708
2028
$2,596,708
All Funds, Five-Year Impact:
Fiscal Year
Probable Savings/(Cost) from General Revenue Fund 1
Probable Revenue Gain/(Loss) from General Revenue Fund 1
Probable Revenue Gain/(Loss) from Property Tax Relief Fund 304
Probable Revenue Gain/(Loss) from Physician Ed. Loan Repayment 5144
2024
($1,034,000)
$1,925,000
($1,200,000)
$0
2025
($1,102,734)
$2,342,000
($1,321,000)
$0
2026
($1,185,806)
$3,980,000
($1,343,000)
($1,427,000)
2027
($1,270,292)
$3,928,000
($1,368,000)
($1,180,000)
2028
($1,270,292)
$3,867,000
($1,395,000)
($932,000)
Fiscal Year
Change in Number of State Employees from FY 2023
2024
14.0
2025
14.0
2026
14.0
2027
14.0
2028
14.0
Fiscal Analysis
The bill would amend the Tax Code by adding Chapter 164 regarding excise tax on nontobacco nicotine products.
The bill would impose a tax on the first sale of nontobacco nicotine products in this state. The rates would be five cents per milliliter for open-system e-cigarettes, five cents per e-cigarette pod to be used in closed-system e-cigarettes, five percent of the wholesale cost price on closed-system e-cigarettes that do not use an e-cigarette pod, and $1.23 per ounce of net volume of each alternative nicotine product. A person who failed to pay the tax when due under Section 164.0005 would pay an additional five percent of the amount of the tax due as a penalty. A person who failed to pay the tax and penalty before the 31st day after the date that the tax is due would pay an additional five percent of the amount of the tax due as a penalty. The minimum penalty would be $50.
The bill would require persons receiving e-cigarettes or alternative nicotine products for the purpose of making the first sale in Texas to submit a monthly report as prescribed by the Comptroller. There would be a penalty for failing to maintain proper records and submitting the monthly report to the Comptroller of up to $2,000 for each day a violation occurred.
Methodology
This analysis is based on the 2024-25 Biennial Revenue Estimate, convenience store product share data from the August 2020 issue of Convenience Store News, and vapor tax collections from the state of Washington. Under current Comptroller practice, alternative nicotine products that are not e-cigarettes are subject to the tobacco products tax and the losses therefrom are included in the fiscal impact table along with the offset gains to General Revenue Fund 0001 from the new nontobacco nicotine products taxes.
The Comptroller's office anticipates needing to hire 14.0 FTEs to administer the provisions of the bill: two Managers (I and IV) and one Program Specialist, beginning in fiscal year 2024 as a level II and reaching level V by fiscal year 2027, would be needed to provide training and subject matter expertise for the new tax; seven Taxpayer Compliance Officers would be needed, beginning at level II in fiscal year 2024 and reaching level V by fiscal year 2027, to pursue collections of delinquent taxes and reports and to accommodate the added taxpayers in filing and paying the tax; one Customer Service Representative III would be needed to handle the increase in administrative functions within the agency as a result of adding the new tax type; and three Accounts Examiners III would be needed to support the call center and help taxpayers understand and comply with this new tax, as well as handle phone calls and reporting from taxpayers. This analysis assumes administrative costs of $1.0 million in fiscal year 2024, increasing to $1.3 million in fiscal year 2027 and continuing in subsequent years.
Local Government Impact
No fiscal implication to units of local government is anticipated.