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July 11, 2001
FOR IMMEDIATE RELEASE
Review of the 77th Session of the Texas Legislature.
The Texas Legislature's 77th session ended May 28, 2001. The Legislature
will not reconvene until January 2003. The following is a comprehensive
review of the major tax-related
bills passed this session. This review, however, does not attempt to analyze
the hundreds of tax bills filed. For more information, please contact
a Ryan & Company professional.
The major concern for corporate taxpayers will be the 2003 Session where
a significant tax bill now seems likely.
1. Senate
Bill 1125 - Technical Corrections.
S.B.
1125 has been signed by the Governor and will be effective September
1, 2001.
S.B. 1125, Section 3, amends Texas Local Government Code Section 326.029.
The bill sets forth additional contents and filing requirements of an
order canvassing the results of the election to confirm a library district.
S.B. 1125, Section 4, amends Texas Local Government Code Chapter 363,
Subchapter F by adding Section 363.262. The bill requires the notification
of the Comptroller of Public Accounts in writing no later than the 10th
day after the referendum returns are canvassed for a continuation or
dissolution of a crime control and prevention district election by the
board of directors of the district. The bill sets forth provisions regarding
the effective date of the abolition of local crime control sales and
use tax after a district is dissolved or discontinued by referendum.
S.B. 1125, Section 6, amends Texas Local Government Code Section 383.104
by adding Subsection C. The bill sets forth provisions regarding the
discontinuance of the sales and use tax of a county development district
if the tax revenue is not collected within the district before the first
anniversary of the date the tax took effect, the required notification
by the Comptroller to the board of directors of the district and the
commissioners court of the county of the discontinuance of the tax,
and the authorization of the district to reimpose the tax after discontinuance.
S.B. 1125, Section 10, amends Texas Tax Code Section 111.302. The bill
increases the time period from 60 to 90 days within which the Comptroller
is required to compute the total amount of a tax refund for certain
ad valorem taxes. If an eligible person who enters into tax abatement
agreements with the municipality and the county, and the agreements
provided to the Comptroller show the agreements exempt different portions
of the property value, then the refund amount is required to be computed
based on the greater of the portions exempted.
S.B. 1125, Section 12, amends Texas Tax Code Section 151.007(a). The
bill provides that the cost of "installation" is included in the sales
price of a taxable item.
S.B. 1125, Section 13, amends Texas Tax Code Section 151.010. The bill
provides that the sales or use of a taxable item in electronic form
instead of on physical media does not alter its tax status, unless otherwise
provided.
S.B. 1125, Section 14, amends Texas Tax Code Section 151.057. The bill
replaces the sales tax exemption for "temporary help services" with
an exemption for a "temporary employment service as defined by Section
93.001, Labor Code."
S.B. 1125, Section 16, amends Texas Tax Code Section 151.257. The bill
provides that a surety's obligation under a bond filed is not affected
by whether the surety has a record of the receipt of a copy of the Comptroller's
determination notice or payment demand.
S.B. 1125, Section 17, amends Texas Tax Code Chapter 151, Subchapter
H by adding Section 151.3021. The bill exempts internal and external
wrapping, packing, and packaging supplies from the imposition of the
limited sales, excise, and use tax if sold to a person who is a laundry
or dry cleaner for use in wrapping, packing, or packaging an item that
has been pressed and dry cleaned or laundered by the person operating
as a laundry or dry cleaner in the regular course of business.
S.B. 1125, Section 19, amends Texas Tax Code Section 151.310(d). The
bill provides that if two or more organizations jointly hold a tax-free
sale or auction, each organization is authorized to hold one additional
tax-free sale or auction during the calendar year in which the joint
sale or auction is held.
S.B. 1125, Section 20, amends Texas Tax Code Section 151.313. The bill
includes dietary supplements as an item that is exempt from the sales,
excise, and use taxation. The bill also sets forth provisions regarding
the characteristics of a product for it to be considered a dietary supplement
or a drug or medicine.
S.B. 1125, Section 21, amends Texas Tax Code Section 151.317. The bill
provides that the gas and electricity used in timber operations, including
the pumping for irrigation of timber land is exempt from the limited
sales, excise, and use tax.
S.B. 1125, Section 22, amends Texas Tax Code Section 151.318. The bill
includes photographic props that are necessary and essential to and
used in connection with the printing process in the exemption of sales,
excise, and use tax if a person engaged in certain printing or producing
operations purchases them.
S.B. 1125, Section 23, amends Texas Tax Code Chapter 151, Subchapter
H, by adding Section 151.3181. The bill provides that the divergent
use of exempted manufacturing property will not result in sales and
use tax being due on the property if the divergent use occurs after
the fourth anniversary of the date the property was purchased. The bill
sets forth provisions regarding the calculation of the sales and use
tax due on certain exempt manufacturing properties, the amount of divergent
use, the total use of property, and the percentage of divergent use.
S.B. 1125, Section 24, amends Texas Tax Code Section 151.3185. The bill
provides that the sale of a motion picture, video, or audio master by
the producer of the master and the sale of tangible personal property
to certain entities is also exempt from the limited sales, excise, and
use tax.
S.B. 1125, Section 26, amends Texas Tax Code Section 152.052. The bill
authorizes a person who is a motor vehicle owner, who is in the business
of renting motor vehicles, and holds a permit to deduct the fair market
value of a replaced motor vehicle that is titled to another person,
if the replaced motor vehicle is offered for sale, and either person
holds a beneficial ownership interest in the other person for at least
80 percent or acquires all of its vehicles exclusively from franchised
dealers whose franchisor shares common ownership with the other person.
S.B. 1125, Section 27, amends Texas Tax Code Section 152.041. The bill
provides that for motor vehicles designed for commercial use, the imposition
of retail sales tax and tax on motor vehicles purchased outside this
state is due on the 20th working day after the date the motor vehicle
is equipped with a body or other equipment that enables it to be registered
under the Transportation Code.
S.B. 1125, Section 30, amends Texas Tax Code Section 153.001, Subdivision
(25). The bill includes dyed diesel fuel bonded users, agricultural
bonded users, and bulk users in provisions regarding motor fuel taxation.
S.B. 1125, Section 31, amends Texas Tax Code Section 151.018. The bill
requires a bulk plant to post notices regarding certain duties of importers
and exporters in a conspicuous location proximate to the point of receipt
of shipping papers.
S.B. 1125, Section 35, amends Texas Tax Code Section 153.122. The bill
removes the filing fee for a gasoline tax refund payment. S.B. 1125,
Section 36, amends Texas Tax Code Section 153.203. Provisions imposing
a diesel fuel tax do not apply to the volume of water that is blended
together with taxable diesel fuel when the finished product sold or
used is clearly identified on the retail pump, storage tank, and sales
invoice as a combination of diesel fuel and water.
S.B. 1125, Section 37, amends Texas Tax Code Section 153.205. The bill
modifies provisions regarding the use of a signed statement to purchase
dyed diesel fuel or undyed diesel fuel and prohibits a supplier from
making a tax-free sale of any diesel fuel to a purchaser using a signed
statement unless the purchaser has an end user number or agricultural
exemption number issued by the Comptroller. The bill modifies the taxation
of the sale of dyed diesel fuel and undyed diesel fuel provided a purchaser
furnishes a signed statement with certain stipulations and modifies
the tax-free sale of dyed and undyed diesel fuel for an agricultural
nonhighway use provided the purchaser furnishes a signed statement with
certain stipulations. The bill sets forth provisions regarding the relief
of a permitted supplier from the burden of proof for nontaxable dyed
or undyed diesel fuel, and the criminal penalty and forfeiture of rights
for certain offenses related to the taxation of dyed or undyed diesel
fuel.
S.B. 1125, Section 41, amends Texas Tax Code Section 153.221. The bill
deletes the provision that a common or contract carrier is required
to file a report regarding diesel fuel transactions.
S.B. 1125, Section 43, amends Texas Tax Code Section 153.225. The bill
deletes provisions regarding the filing fee for diesel fuel tax refund
payments.
S.B. 1125, Sections 46 to 53 and Section 55, amend Texas Tax Code Sections
154.001, 154.101, 154.102, 154.110, 154.501, 155.001, 155.041, 155.048
and 155.201 respectively. The bill provides for taxation purposes, that
the permit requirements of and the penalties applicable to cigarette,
cigar, or tobacco of cigarette, cigar, and tobacco product distributors,
wholesalers, bonded agents, and retailers also apply to manufacturers
and importers of these products.
S.B. 1125, Section 54, amends Texas Tax Code Section 155.111. The bill
requires a distributor of tobacco products to include in the required
report regarding the sale, distribution, exchange, or use of tobacco
products only tobacco products that are sold in this state if more than
fifty percent of all untaxed tobacco products received by the distributor
in this state are actually sold outside of this state.
S.B. 1125, Section 56, amends Texas Tax Code Section 171.076. The bill
specifies that the exemption of an incorporated cooperative credit association
from the franchise tax includes an organization under a federal charter
for a production credit association or an agricultural credit association
regulated by the Farm Credit Administration.
S.B. 1125, Sections 57 and 58, amend Texas Tax Code Sections 171.1032
and 171.051 respectively. The sections provide, in apportioning taxable
earned surplus, that a corporation is required to include in the gross
receipts from its business done in this state and its entire business,
the corporation's share of certain gross receipts of each partnership
and joint venture.
S.B. 1125, Section 59, amends Texas Tax Code Section 171.176. A banking
corporation, in order to determine the taxable income and taxable earned
surplus, is required to exclude from the numerator of its apportionment
factor interest earned on federal funds and interest earned on securities
sold under agreement to repurchase that are held in this state in a
correspondent bank that is domiciled in this state.
S.B. 1125, Section 60, amends Texas Tax Code Section 171.109. The bill
provides that for the determination of taxable income and taxable earned
surplus, a corporation must use the equity method of accounting when
reporting an investment in a partnership or joint venture.
S.B. 1125, Section 61, amends Texas Tax Code Section 171.1121. The bill
sets forth provisions regarding a corporation's share of a partnership's
gross receipts that is included in its federal taxable income that must
be used in calculating the corporation's gross receipts for earned surplus
purposes. The gross receipts must be apportioned as though the corporation
directly earned them.
S.B. 1125, Sections 63 to 65 and Section 71, amend Texas Tax Code Sections
171.501, 171.655, 171.685 and 171.834 respectively. The bill modifies
provisions regarding a refund for job creation in an enterprise zone,
tax credit for wages paid to the participants or former participants
of the Texas Department of Criminal Justice work program, tax credit
for wages paid to certain children committed to the Texas Youth Commission,
and tax credit for before and after programs for children.
S.B. 1125, Section 66, amends Texas Tax Code Section 171.705. The bill
provides that for a tax credit for establishing a day-care center or
purchasing child-care services, a corporation is prohibited from claiming
as a tax credit an amount before any other applicable credits that exceeds
90 percent of the amount of tax due for the report for tax credit.
S.B. 1125, Section 67, amends Texas Tax Code Section 171.753. The bill
decreases, from 25 percent to 5 percent of the total wages and salaries
paid by a corporation for qualifying jobs during the period upon which
the tax is based, to receive a tax credit for the specified creation
of jobs by a corporation.
S.B. 1125, Section 68, amends Texas Tax Code Section 171.754. The bill
deletes provisions that require the credit to be claimed in five equal
installments of one-fifth the credit amount.
S.B. 1125, Section 72, amends Texas Tax Code Chapter 171 by adding Subchapter
S. The bill prohibits the total credits for franchise taxes in the tax
credit report by a corporation, including the amount of any carryforward
credits, from exceeding the amount of franchise tax due for the report.
S.B. 1125, Section 73, amends Texas Tax Code Section 211.055. The bill
deletes provisions regarding the maximum inheritance tax imposed and
requires that the amount of inheritance taxes is not to exceed the amount
of tax calculated under certain federal provisions.
S.B. 1125, Section 74, amends Texas Tax Code Section 321.102. The bill
provides that the two percent limit on the combined rate of all sales
and use tax imposed by municipality and a local governmental entity
on an area do not apply to a local governmental entity that has outstanding
indebtedness or obligations that are payable wholly or partly from the
sales and use tax revenue of the entity. The bill prohibits the combined
rate of all sales and use tax imposed by a municipality, local governmental
entity, and any other political subdivisions, except library districts,
having territory in the district from exceeding two percent at any location
in the municipality.
S.B. 1125, Sections 75 to 77, amend Texas Tax Code Subchapter D, Chapters
321 to 323 respectively. The bill sets forth provisions regarding the
issuance, imposition, retainment, and remittance of the sales and use
tax of a municipality, a special purpose district, and a county.
S.B. 1125, Section 78, amends Texas Health and Safety Code Section 311.045.
The bill deletes the Comptroller's office from the entities with whom
a nonprofit hospital or hospital system is required to file a statement
concerning the satisfying of hospital standards no later than the 120th
day after the end of the fiscal year of a hospital or hospital system.
S.B. 1125, Section 80, amends Texas Property Code Section 74.402. The
bill adds Travis County to the areas that the Comptroller's office is
required to publish notice of a public sale in a newspaper in general
circulation before the 21st day preceding the day on which the public
sale is held. The bill authorizes the Comptroller to post on the Comptroller's
own website the notice of a public sale to be held on the Internet or
by an online auction before the seventh day preceding the date of the
sale or auction is held.
S.B. 1125, Section 81, amends the Texas Racing Act (Article 179(e),
Vernon's Texas Civil Statutes) Section 11.011. The bill amends the Texas
Racing Act to remove provisions regarding the responsibility of a track
where a race originates for the state's share of the pari-mutuel pool
if intrastate wagering pools are combined between tracks. The bill provides
that the racetrack where the wager is made is responsible for reporting
and remitting the state's share of the pari-mutuel pool.
S.B. 1125, Section 83, amends Revised Statutes Article 6550c-1, Section
9. The bill amends law to require the imposition of a sales and use
tax by an intermunicipal commuter rail district and provides that the
rate of imposition is the highest combination of local sales and use
taxes imposed at the time of its creation in any local governmental
jurisdiction that is a member of a district. The bill provides that
all other local sales and use taxes which would otherwise be imposed
on the district property are preempted by the imposition of this tax.
The bill requires the Comptroller to administer, collect, and enforce
any sales and use taxes and provides that the computation, administration,
governance and use of the taxes are governed under the Municipal Sales
and Use Tax Act. The bill sets forth provisions regarding the requirement
of an intermunicipal commuter rail district to provide certain notification
to the Comptroller and affected local jurisdictions of the creation
of the district or acquisition of additional property by the district
and the district's intent to impose a sales and use tax. The bill also
sets forth provisions regarding the requirement of the Comptroller to
notify the district no later than the 30th day after the date of the
receipt of such notification by the district whether the Comptroller
is prepared to administer the tax and provides for the effective date
of the imposition of these taxes.
S.B. 1125, Section 84, repeals Texas Tax Code Sections 151.319, Subsections
(d) and (e); 171.757, Subsections (c) and (d); and 201.052, Subsection
(b). The bill repeals the sales, excise, and use tax exemption on certain
tangible personal property and chemicals, catalyst, and other materials
relating to the publication of newspapers. The bill repeals provisions
regarding the expiration of tax credit for certain job creation activities
when the number of a corporation's full-time employees falls below the
number of those employees the corporation had in the year in which the
corporation qualified for the credit, the credit expires and the corporation
is prohibited from taking any remaining installment. The bill also repeals
provisions regarding the minimum tax rate on sweet and sour gas produced
and saved in this state.
S.B. 1125, Section 87, authorizes the Comptroller, before October 1,
2001, to adopt rules and take other actions as the Comptroller deems
necessary or advisable to prepare for this Act to take effect.
| 2. |
Senate Bill 1123 - Relates to the enforcement and collection of taxes,
fees, and other revenue and also provides for criminal penalties. |
S.B. 1123 has been signed by the Governor and will be effective September
1, 2001.
S.B. 1123, Section 2, amends Texas Government Code Section 411.109.
It entitles the Comptroller to obtain from the Department of Public
Safety of the State of Texas criminal history record information maintained
by the Department that the Comptroller believes is necessary for the
enforcement or administration of Chapter 159 (Controlled Substances
Tax) of the Texas Tax Code.
S.B. 1123, Section 6, amends Texas Tax Code Chapter 111, Subchapter
A by adding Section 111.024. It provides that a person who acquires
a business or the assets of a business from a taxpayer through a fraudulent
transfer or a sham transaction is liable for any tax, penalty, and interest
owed by the taxpayer. A transfer of a business or the assets of a business
is considered to be a fraudulent transfer or a sham transaction if the
taxpayer made the transfer or undertook the transaction (1) with intent
to evade, hinder, delay, or prevent the collection of any tax, penalty,
or interest owed under this title or (2) without receiving a reasonably
equivalent value in exchange for the business or business assets subject
to the transfer or transaction. The bill also lists some factors to
be considered in determining the intent of the taxpayer. Additionally
it provides that this section does not apply to a transfer of a business
or the assets of a business through a court order on dissolution of
a marriage or by descent or distribution or testate succession on the
death of a taxpayer.
S.B. 1123, Section 3, amends Texas Tax Code Section 111.020 by adding
Subsection (f). It provides that compliance with Subsection (a) is not
a defense to an assessment of tax liability under Section 111.024 if:
(1) the amount withheld from the purchase price is not sufficient to
fully satisfy the liability of the seller of the business or stock of
goods and (2) the purchase price paid to the seller for the business
or stock of goods is not reasonably equivalent to the value of the business
or stock of goods.
S.B. 1123, Section 7, amends Texas Tax Code Section 113.009 by adding
Subsection (c). It prohibits a state tax lien filed under this chapter
from being released fully until the taxpayer pays all other taxes, penalties,
interest, fees, or sums that the taxpayer owes the state and that are
administered or collected by the Comptroller.
S.B. 1123, Section 9, amends Texas Tax Code Section 151.023. To determine
the amount of tax collected and payable to the state, the amount of
tax accruing and due, and whether a tax liability has been incurred
under this chapter, the bill authorizes the Comptroller or a person
authorized by the Comptroller to (1) inspect at any time during business
hours any business premises where a taxable event has occurred and examine,
copy, and photograph the books, returns, records, papers, and equipment
relating to the conduct in question and (2) require by delivery of written
notice to the taxpayer or to an employee, representative, or agent of
the taxpayer that, not later than the 10th working day after the date
the notice is delivered, the taxpayer produce to an agent or designated
representative of the Comptroller for inspection the books, records,
papers, and returns relating to the taxable activity stated in the notice.
S.B. 1123, Section 10, amends Texas Tax Code Section 151.025, Subsection
(a). It requires all sellers and all other persons storing, using, or
consuming in this state a taxable item purchased from a retailer to
keep: (1) records of gross receipts, including documentation in the
form of receipts, shipping manifests, invoices, and other pertinent
papers, from each rental, lease, taxable service, and taxable labor
transaction occurring during each reporting period; (2) records in the
form of receipts, shipping manifests, invoices, and other pertinent
papers of all purchases of taxable items from every source made during
each reporting period; and (3) records in the form of receipts, shipping
manifests, invoices, and other pertinent papers that substantiate each
claimed deduction or exclusion authorized by law. It also deletes language
regarding receipts invoices and other pertinent papers.
Other sections of the bill define, provide penalties for, and establish
venue for various crimes under this Act.
| 3. |
Senate
Bill 1689 - Redefines which insurance entities qualify for the franchise
tax and clarifies who may claim a business loss after a merger. |
S.B. 1689 has been signed by the Governor and will be effective September
1, 2001.
S.B. 1689, Section 1, amends Texas Tax Code Section 171.052 as described
below.
| A. |
Without
this amendment, "a corporation that is an insurance company,
surety, guaranty, or fidelity company" is eligible for a franchise
tax exemption. If this bill passes, an insurance organization,
title insurance company, or title insurance agent authorized
to engage in insurance business in this state, now required
to pay an annual tax measured by its gross premium receipts,
will be exempt from the franchise tax.
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| B. |
Also,
an insurance organization performing management or accounting
activities in this state on fidelity company" is eligible for
a franchise tax exemption. If this bill passes, an insurance organization,
title insurance company, or title insurance agent authorized to
engage in insurance business in this state, now required to pay
an annual tax measured by its gross premium receipts, will be
exempt from the franchise tax. |
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| C. |
Farm
mutuals, local mutual aid associations, and burial associations
are not subject to the franchise tax. |
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S.B. 1689, section 2, amends Texas Tax Code Section 171.110 to provide
that a business loss can be carried forward only by the corporation
that incurred the loss and cannot be transferred to or claimed by any
other entity, including the survivor of a merger, if the loss was incurred
by the corporation that did not survive the merger.
| 4. |
Senate
Bill 1690 - Modifies provisions relating to the taxation of insurance
companies and certain insurance agents. |
S.B. 1690 has been signed by the Governor and will be effective September
1, 2001.
S.B. 1690 amends the Insurance Code to exempt insurance organizations
that are authorized to do insurance business in this state (other than
surplus lines insurers), title insurance companies, and title insurance
agents from paying a tax levied in proportion to the gross premium receipts
levied by this state or any county or municipality, except as otherwise
provided by the Tax or Labor Code. The bill prohibits this exemption
from being construed to limit the applicability of other taxes, fees,
and assessments or to prohibit the levy and collection of certain taxes.
Additionally, the bill deletes certain provisions relating to the levy
of an occupational tax on insurance organizations, title insurance companies,
title insurance agents, and insurance carriers or related companies.
The bill also deletes the prohibition on requiring domestic insurance
companies to pay occupation or gross receipts taxes.
5. House
Bill 1200 - Creates Tax Incentives Tied to Job Development.
H.B. 1200 was not signed by the Governor, but was automatically passed and
will be effective January 1, 2002, except Section 312.006 of the Texas
Tax Code, as amended by this Act, which will become effective September
1, 2001.
H.B. 1200 amends Texas Tax Code, Subtitle B, Title 3 by adding Chapter
313 as described below.
| A. |
H.B. 1200 allows Texas school sistricts to cap property taxes for businesses
that expand facilities and create new jobs in their area. Specifically,
it authorizes the school districts to place an appraised value
of a company's qualified property for school district maintenance
and operations ad valorem tax purposes. To qualify for the cap,
a business must:
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(1) |
be a corporation or limited liability company, |
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(2) |
use the property in connection with manufacturing, research and development,
or renewable energy electric generation, |
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(3) |
create at least 25 new jobs (for urban areas) or 10 new jobs (for rural
areas), and |
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(4) |
make
a minimum property investment. In addition, the property must
be located in a |
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designated
reinvestment or enterprise zone. The minimum amount of investment
required and the minimum amount of value limitation allowed are
determined based on a sliding scale tied to the taxable value
of property in the particular school district |
| B. |
The bill requires businesses seeking to take advantage of the tax
break to apply to the governing body of the school district in
which the property is located. The governing body has complete
discretion as to whether or not to consider an application. If
it elects to consider an application, it is required to seek a
recommendation from the state Comptroller and to engage a third
party to conduct an economic impact evaluation. Subject to the
minimum amounts imposed in the bill, the amount of the value limitation
is to be negotiated and agreed to between the applicant and the
governing body. |
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| C. |
The bill's drafters were careful to ensure that it does not overlap
with tax abatements provided under the Property Redevelopment
and Tax Abatement Act (Tax Code Chapter 312) by restricting qualified
property to property that is not subject to a tax abatement agreement.
In a related provision, the bill also extends the Property Redevelopment
and Tax Abatement Act through September 1, 2005. |
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6. House
Bill 1845 - Simplified Sales and Use Tax Administration Act.
H.B. 1845 has been signed by the Governor and will be effective September
1, 2001.
H.B. 1845, Section 1, amends Texas Tax Code Title 2, Subtitle D by adding
Chapter 142 as described below.
| A. |
Requires
this state to enter into multistate discussions for the purposes
of reviewing or amending the agreement embodying the simplification
requirements prescribed by Section 142.007. It also prohibits
this state from being represented by more than four delegates
for purposes of those discussions. |
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| B. |
Provides
that the Comptroller is authorized and directed to participate
in the development of the Streamlined Sales and Use Tax Agreement
with one or more states to simplify and modernize sales and use
tax administration in order to substantially reduce the burden
of tax compliance for all sellers and for all types of commerce.
It also authorizes the Comptroller, in the development of the
agreement, to act jointly with other states that are members of
the agreement to establish standards for certification of a certified
service provider and certified automated system and establish
performance standards for multistate sellers. In addition, it
authorizes the Comptroller or the Comptroller's designee to represent
this state before the other states that are signatories to the
agreement. |
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| C. |
Provides
that the agreement authorized by this chapter does not, in whole
or part, invalidate or amend a law of this state and adoption
of the agreement by this state does not amend or modify a law
of this state. It requires implementation of a condition of the
agreement in this state, whether adopted before, at, or after
membership of this state in the agreement, to be by the action
of this state. |
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| D. |
Prohibits
the Comptroller from entering into the agreement authorized by
this chapter unless the agreement requires each state to comply
with the requirements prescribed by this section. |
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The bill requires the agreement to: |
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1. |
set restrictions to limit over time the number of state rates. |
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2. |
establish
uniform standards for the sourcing of transactions to taxing jurisdictions,
the administration of exempt sales, and sales and use tax returns
and remittances. |
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3. |
provide
a central, electronic registration system that allows a seller to
register to collect and remit sales and use taxes for all signatory
states. |
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4. |
provide
that registration with the central registration system and the collection
of sales and use taxes in the signatory states will not be used
as a factor in determining whether the seller has nexus with a
state for any tax. |
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5. |
set restrictions to limit over time the number of state rates. |
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a. |
restricting
variances between the state and local tax bases; |
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b. |
requiring
states to administer any sales and use taxes levied by local jurisdictions
within the state so that sellers collecting and remitting these
taxes will not have to register or file returns with, remit funds
to, or be subject to independent audits from local taxing jurisdictions;
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c. |
restricting
the frequency of changes in the local sales and use tax rates
and setting effective dates for the application of local jurisdictional
boundary changes to local sales and use taxes; and |
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d. |
providing
notice of changes in local sales and use tax rates and of changes
in the boundaries of local taxing jurisdictions. |
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6. |
outline any monetary allowances that are to be provided by the
states to sellers or certified service providers. |
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7. |
allow
for a joint public and private sector study of the compliance
cost on sellers and certified service providers to collect sales
and use taxes for state and local governments under various levels
of complexity to be completed by July 1, 2002. |
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8. |
require
each state to certify compliance with the terms of the agreement
before joining and to maintain compliance, under the laws of the
member state, with all provisions of the agreement while a member. |
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9. |
require
each state to adopt a uniform policy for certified service providers
that protects the privacy of consumers and maintains the confidentiality
of tax information. |
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10. |
provide
for the appointment of an advisory council of private sector representatives
and an advisory council of nonmember state representatives to
consult with in the administration of the agreement. |
| E. |
Provides
that the agreement authorized by this chapter is an accord among
individual cooperating sovereigns in furtherance of their governmental
functions. Further, it provides that the agreement provides a
mechanism among the member states to establish and maintain a
cooperative, simplified system for the application and administration
of sales and use taxes under the duly adopted law of each member
state. |
|
| F. |
Provides
that the agreement authorized by this chapter binds and inures
only to the benefit of this state and the other member states.
Also it provides that a person, other than a member state, is
not an intended beneficiary of the agreement. A benefit to a person
other than a state is established by the law of this state and
the other member states and not by the terms of the agreement.
A person does not have a cause of action or defense under the
agreement or by virtue of this state's approval of the agreement.
The bill prohibits a person from challenging, in any action brought
under any law, an action or inaction by any department, agency,
or other instrumentality of this state, or any political subdivision
of this state, on the ground that the action or inaction is inconsistent
with the agreement. Prohibits a law of this state, or the application
of the law, from being declared invalid as to any person or circumstance
on the ground that the provision or application is inconsistent
with the agreement |
|
| G. |
Provides
that a certified service provider is the agent of a seller, with
whom the certified service provider has contracted, for the collection
and remittance of sales and use taxes. As the seller's agent,
the certified service provider is liable for sales and use tax
due each member state on all sales transactions the provider processes
for the seller except as provided by this section. |
|
| H. |
The
bill provides that a seller that contracts with a certified service
provider is not liable to this state for sales or use tax due
on transactions processed by the certified service provider unless
the seller misrepresented the type of items it sells or committed
fraud. In the absence of probable cause to believe that the seller
has committed fraud or made a material misrepresentation, the
seller is not subject to audit on the transactions processed by
the certified service provider. A seller is subject to audit for
transactions not processed by the certified service provider.
Authorizes the member states acting jointly to perform a system
check of the seller and review the seller's procedures to determine
if the certified service provider's system is functioning properly
and the extent to which the seller's transactions are being processed
by the certified service provider. |
|
| I. |
Provides
that a person that provides a certified automated system is responsible
for the proper functioning of that system and is liable to this
state for underpayments of tax attributable to errors in the functioning
of the certified automated system. A seller that uses a certified
automated system remains responsible and is liable to this state
for reporting and remitting tax. |
|
| J. |
Provides
that a seller that has a proprietary system for determining the
amount of tax due on transactions and has signed an agreement
establishing a performance standard for that system is liable
for the failure of the system to meet the performance standard. |
|
| 7. |
House
Bill 1098 - Modifies the procedure for the collection of taxes on
printed materials distributed by mail. |
H.B. 1098 has been signed by the Governor and will be effective
September 1, 2001.
H.B. 1098, Section 1, amends Texas Tax Code Section 151.052 by adding
Subsection (d) as described below.
| A. |
The
bill establishes a presumption for the purposes of the printer's
tax collection duty. It is presumed that printed materials distributed
by the U.S. Postal Service (either singly or in sets), addressed
to individual recipients (other than the purchaser), and that
are either produced at a printer's facility in this state or purchased
in this state are for use in Texas. Under this presumption, the
printer must collect the tax imposed under this chapter. |
|
| B. |
The
bill also establishes the requirements to overcome the above presumption.
The purchaser is required to issue an exemption certificate to
the printer if the materials are for distribution to both in-state
and out-of-state recipients. The certificate must state that the
printed materials are for multi-state use and that the purchaser
agrees to pay this state all taxes that are or may become due
to this state on the taxable items purchased under the certificate. |
|
|
"Printed
materials" is defined under this subsection as "materials that
are produced by web offset or rotogravure printing processes." |
|
| D. |
A
printer that is relieved of the obligation to collect the taxes
imposed by this chapter on the foregoing materials is required
to file a report as provided by Section 151.407. H.B. 1098, Section
3, allows the Comptroller to adopt rules and forms to implement
the collection requirements provided by Subsection (d) of the
Texas Tax Code Section 151.052 added by this Act. |
|
| 8. |
Senate
Bill 1497 - Establishes uniform nationwide sourcing rules for state
and local |
|
taxation of mobiletelecommunications services. |
S.B. 1497 has
been signed by the Governor and will be effective August 1, 2002.
S.B. 1497, Section 1, amends Texas Tax Code Chapter151, Subchapter
C by adding Section 151.061 as described below.
| A. |
Defines
"home service provider," "place of primary use," and "electronic
database." |
| |
| B. |
Provides
that this section applies to state and local sales and use taxes. |
| C. |
Provides
that the Mobile Communications Sourcing Act (4 U.S.C. Sections
116-126) governs the sourcing of charges for mobile communications
services. In accordance with that act, the following requirements
have to be met: |
|
(1) |
Mobile
telecommunications services provided to a customer in a taxing
jurisdiction shall be deemed to be provided by the customer's
home service provider if the charges are billed by or for the
customer's home service provider. |
|
|
(2) |
All
charges deemed to be provided by the customer's home service provider
are authorized to be subjected to tax, charge or fee by the taxing
jurisdictions whose territorial limits encompass the customer's
place of primary use. This is regardless of where the mobile telecommunications
services originate, terminate, or pass through. Also, no other
taxing jurisdiction may impose a tax, charge or fee on charges
for such services. |
| D. |
Provides
for the procedure and requirements for notifying the home service
provider if the customer believes that the amount of tax or assignment
of place of primary use or taxing jurisdiction included on a billing
is erroneous. |
| E. |
Requires
the home service provider, not later than the 60th day after the
date it receives a request under Subsection (d), to review its
records and the electronic database or enhanced zip code to determine
the correct amount of the tax imposed of the assignment or the
customer's place of primary use or taxing jurisdiction, as appropriate.
If the home service provider determines that the amount of tax
imposed or the assignment of place of primary use or taxing jurisdiction
is incorrect, the bill requires it to correct the error and refund
or credit any amount of tax erroneously collected from the customer
for a period of up to four years. If the home service provider
determines that the amount of tax imposed or the assignment of
place of primary use or taxing jurisdiction is correct, the bill
requires it to provide a written explanation to the customer. |
| F. |
Provides
that the procedures prescribed by Subsections (E) and (F) are
the first course of remedy available to a customer requesting
a correction of assignment of place of primary use or of taxing
jurisdiction or a refund of or other compensation for taxes erroneously
collected by the home service provider. |
| G. |
Authorizes
the state, or designated database provider, to provide an electronic
database to a home service provider. |
| H. |
Requires
the state or the designated database provider that provides or
maintains an electronic database to provide notice of the availability
of the then current electronic database, and any subsequent revisions
thereof, by publication in the manner normally employed by the
state. |
| I. |
Provides
that a home service provider using the data contained in an electronic
database is exempt from any tax, charge, or fee liability that
otherwise would be due solely as a result of any error or omission
in such database provided by the state or designated database
provider. It also requires the home service provider to reflect
changes made to such database during a calendar quarter not later
than 30 days after the end of such calendar quarter. |
| J. |
Provides
that if neither the state nor the designated database provider
provides an of
flood control taxes or the use of funds generated by flood
control taxes.electronic database, a home service provider
is to be exempt from any tax, charge, or fee liability in the
state that otherwise would be due solely as a result of an assignment
of a street address to an incorrect taxing jurisdiction. But only
if, subject to Subsection (N), the home service provider employs
an enhanced zip code to assign each street address to a specific
taxing jurisdiction for each level of taxing jurisdiction and
exercises due diligence at each level of taxing jurisdiction to
ensure that each such street address is assigned to the correct
taxing jurisdiction. The bill requires that if an enhanced zip
code overlaps boundaries of taxing jurisdictions of the same level,
the home service provider is to designate one specific jurisdiction
within such enhanced zip code for use in taxing the activity for
such enhanced zip code for each level of taxing jurisdiction.
It also provides that any enhanced zip code assignment changed
in accordance with Subsection (N) is deemed to be in compliance
with this section. For purposes of this section, there is a rebuttable
presumption that a home service provider has exercised due diligence
if such home service provider demonstrates that it has undertaken
certain requirements. |
| K. |
Provides
that Subsection (J) applies to a home service provider that is
in compliance with the requirements of that subsection if an electronic
database is not provided until the later of: (1) 18 months after
the nationwide standard numeric code has been approved by the
Federation of Tax Administrators and the Multistate Tax Commission
or (2) 6 months after the state or a designated database provider
in the state provides such database. |
| L. |
Requires
a home service provider to be responsible for obtaining and maintaining
the customer's place of primary use. Subject to Subsection (N),
and if the home service provider's reliance on information provided
by its customer is in good faith, the bill requires the taxing
jurisdiction to (1) allow a home service provider to rely on the
applicable residential or business street address supplied by
the home service provider's customer and (2) not hold a home service
provider liable for any additional taxes, charges, or fees based
on a different determination of the place of primary use for taxes,
charges, or fees that are customarily passed on to the customer
as a separate itemized charge. |
| M. |
Requires
a taxing jurisdiction, except as provided in Subsection (n), to
allow a home service provider to treat the address used by the
home service provider for tax purposes for any customer under
a service contract or agreement in effect two years after the
date of the enactment of the Mobile Telecommunications Sourcing
Act (4 U.S.C. Sections 116-126) as that customer's place of primary
use for the remaining term of such service contract or agreement,
for purposes of determining the taxing jurisdiction to which taxes,
charges, or fees on charges for mobile telecommunications services
are remitted. |
| N. |
Authorizes
the state to determine that the address used for purposes of determining
the taxing jurisdictions to which taxes, charges, or fees for
mobile telecommunications services are remitted does not meet
the definition of place of primary use under Subsection (a)(2)
and give binding notice to the home service provider to change
the place of primary use on a prospective basis from the date
of notice of determination. Before the state gives such notice
of determination, the customer shall be given an opportunity to
demonstrate, in accordance with applicable state administrative
procedures, that the address is the customer's place of primary
use. It also authorizes the state to determine that the assignment
of a taxing jurisdiction by a home service provider under Subsection
(J) does not reflect the correct taxing jurisdiction and give
binding notice to the home service provider to change the assignment
on a prospective basis from the date of notice of determination.
The home service provider shall be given an opportunity to demonstrate,
in accordance with applicable state administrative procedures,
that the assignment reflects the correct taxing jurisdiction. |
| O. |
If
a taxing jurisdiction does not otherwise subject charges for mobile
telecommunications services to taxation and if these charges are
aggregated with and not separately stated from charges that are
subject to taxation, then the charges for nontaxable mobile telecommunications
services may be subject to taxation unless the home service provider
can reasonably identify charges not subject to such tax, charge,
or fee from its books and records that are kept in the regular
course of business. Also, if a taxing jurisdiction does not subject
charges for mobile telecommunications services to taxation, a
customer may not rely upon the nontaxability of charges for mobile
telecommunications services unless the customer's home service
provider separately states the charges for nontaxable mobile telecommunications
services from taxable charges or the home service provider elects,
after receiving a written request from the customer in the form
required by the provider, to provide verifiable data based upon
the home service provider's books and records that are kept in
the regular course of business that reasonably identifies the
nontaxable charges. |
S.B. 1497, Sections
2 and 3, amend Texas Tax Code Sections 321.203(g) (Municipal sales
and use tax) and 323.203(g) (County sales and use tax) respectively,
to provide that sales of mobile communications services are carried
out according to the provisions of Section 151.061.
S.B. 1497, Section 4, amends Texas Health and Safety Code Chapter
771D by adding Section 771.0735 to provide as in 1(C) above with the
additional requirement that the fee imposed on wireless telecommunications
bills shall be administered in accordance with Texas Tax Code Section
151.061.
| 9. |
House
Bill 244 - Exempts certain emergency service organizations from
the sales and use taxes on boats and boat motors. |
H.B. 244 has been signed by the Governor and has been in
effect since May 21, 2001.
H.B. 244, Section 1, amends Texas Tax Code Chapter 160, Subchapter B
by adding Section 160.0245 to provide an exemption to the taxes imposed
by this chapter on the sale or use of a taxable boat or boat motor.
Volunteer fire departments and other departments, companies, and associations
organized for the purpose of answering fire alarms and extinguishing
fires or for the purpose of answering fire alarms, extinguishing fires,
and providing emergency medical services may be entitled to the exemption.
The department, company or association must receive no or nominal compensation
for their services and the boat or motor must be used exclusively by
them to qualify.
| 10. |
House
Bill 82 - Adds an exemption from sales and use taxes for certain
taxable items sold by a qualified student organization affiliated
with an institution of higher learning. |
H.B.
82 has been signed by the Governor and will be effective October 1,
2001.
H.B. 82, Section 1, amends Texas Tax Code Section 151.321 by adding
Subsection (b). It provides that in each calendar year, the first $5,000
of a qualified student organization's total receipts from sales of taxable
items not otherwise exempt under Subsection (a) is exempt from the sales
taxes. Subsection (b) is limited by the same previous requirements as
under Subsection (a).
| 11. |
Senate
Bill 601 - Creates a tax credit for investing in a certified capital
company. |
S.B. 601 has been signed by the Governor and has been in effect
since May 28, 2001.
S.B. 601, Section 1, amends Chapter 4 of the Insurance Code by adding
Subchapter B as described below.
| A. |
It
requires the Comptroller to administer the provisions of the bill
and authorizes the Comptroller to adopt rules and forms to implement
the provisions. |
| B. |
The
bill sets forth the qualifications and application procedures
of a certified capital company. |
| C. |
The
bill prohibits the management or certain types of ownership or
control of a certified capital company by an insurance company,
group of insurance companies, or other person who may have a premium
tax liability. |
| D. |
It
sets forth provisions relating to the offering material involving
the sale of securities of a certified capital company, requirements
for continuance of certification, evaluating of a business by
the Comptroller, reports to the Comptroller and audited financial
statements, renewal of certification, distributions and repayment
of debt, annual review and decertification, and recapture and
forfeiture of premium tax credits. |
| E. |
The
bill authorizes a certified capital company to agree to indemnify
against losses resulting from recapture or forfeiture of premium
tax credits. |
| F. |
The
bill provides that a certified investor who makes an investment
of certified capital in the year of investment earns a vested
credit against state premium tax liability equal to 100 percent
of the certified investor's investment of certified capital, subject
to specified limits. The bill authorizes a certified investor
to take up to 10 percent of the vested premium tax credit in any
taxable year of the certified investor. |
| G. |
The
bill provides that the total amount of certified capital for which
premium tax credits may be allowed under these provisions for
all years in which premium tax credits are allowed is $200 million.
The bill prohibits the total amount of certified capital for which
premium tax credits may be allowed for all certified investors
from exceeding the amount that would entitle all certified investors
in certified capital companies to take total credits of $20 million
in a year. |
| H. |
It
requires the Comptroller to allocate the total amount of premium
tax credits allowed under the provisions of the bill to certified
investors in certified capital companies on a pro rata basis in
accordance with specified requirements. |
| I. |
The
bill sets forth provisions relating to the impact of tax credits
claimed by a certified investor on insurance rates and the transferability
of credit. |
| J. |
The
bill requires the Comptroller to prepare a biennial report to
the governor, lieutenant governor, and speaker of the house with
respect to the implementation of the provisions of the bill and
sets forth the required content of that report. |
| K. |
The
bill provides that implementation of the provisions of the bill
are subject to available revenue. The bill requires the Comptroller
to implement theprovisions of the bill not later than the 60th
day after the effective date of the bill. |
| 12. |
House
Bill 394 - Changes location for filing inventory in order to conduct
a going out of business sale and provides notice guidelines for
the chief appraiser. |
H.B. 394 has
been signed by the Governor and will be effective September 1, 2001.
H.B. 394, Section 1, amends Texas Business and Commerce Code Section
17.83(a). It requires a person, in order to conduct a going out of
business sale, to file an original inventory with the chief appraiser
of the appraisal district, rather than county clerk, in which the
person's principal place of business in the state is located.
H.B. 394, Section 2, amends Chapter 17, Subchapter F of the Texas
Business and Commerce Code by adding Section 17.835. It requires the
chief appraiser, not later than the fifth business day after the date
on which a person files an original inventory under Section 17.83,
to send notice of the filing to the Comptroller, the county clerk
of the county in which the person's principal place of business in
the state is located, and the tax collector for each of the taxing
units that tax the property described in the original inventory.
| 13. |
Senate
Bill 640 - Requires electronic filing of certain tax reports and
payments. |
S.B. 640 has been signed by the Governor and has been in effect since
May 3, 2001.
S.B. 640, Section 1, amends Texas Tax Code Chapter111, Subchapter B
by adding Sections 111.0625 and 111.0626 as described below.
| A. |
Section
111.0625 compels the Comptroller by rule to require a taxpayer
who paid $100,000 or more during the preceding fiscal year in
a category of payments required under this title to transfer payments
in that category transfer payments in that category by means of
electronic funds transfer in accordance with Section 404.095 (Electronic
Transfer of Certain Payments), Government Code, if the Comptroller
reasonably anticipates the person will pay at least that amount
during the current fiscal year. |
| B. |
Section
111.0626 compels the Comptroller by rule to require electronic
filing of a report required under Chapter 151, 201, or 202, or
an international fuel | | | | |