84(R) - 2015
House Ways & Means
House Ways & Means
Relating to the applicability of the sales and use tax to certain insurance services.
Following the amendment adopted on the House floor, a new fiscal note dated May 14, 2015 anticipates a negative two-year net impact to General Revenue Related Funds for House Bill 1841 as engrossed of $13,880,000 through the biennium ending August 31, 2017.
First fiscal note:
A fiscal note dated April 6, 2015 anticipates a negative two-year net impact to General Revenue Related Funds for House Bill 1841 of $2,000,000 through the biennium ending August 31, 2017.
House Bill 1841 would amend Chapter 151 of the Tax Code (related to the state sales tax) to change the definition of "insurance service" to exclude from the tax a service performed on behalf of an insured by a person licensed under Chapter 4102 of the Insurance Code.
Vote Recommendation Notes
An amendment has been introduced on the House floor that would also exclude from the definition of "insurance service" a service provided by a person certified as a public accountant under Chapter 901 of the Occupations Code, which would result in that case in exempting the service from the sales tax too. This change would increase the fiscal note (see fiscal note update).
No changes have been made to the bill in Senate committee after it was amended. We continue to remain neutral.
The second chamber sponsors is Senator Charles Perry.
First chamber recommendation:
House Bill 1841 would exempt from the sales tax a service performed on behalf of an insured by a person licensed under Chapter 4102 of the Insurance Code -- that is, a public adjuster.
Claims adjusters investigate, appraise, and negotiate insurance claims. Public adjusters work exclusively for policyholders and are often considered a cost-effective alternative for many consumers when settling a claim.
We contend that exempting from the sales tax a particular group of services among others is unfair and economically problematic. It creates distortions on the free market that can have unintended consequences down the line.
On the other hand, in this particular case, there is an inequality to address. Since consumers do not pay sales tax when purchasing an insurance policy for property coverage or when hiring a lawyer to settle an insurance claim, the same treatment should be offered to consumers when using a public adjuster to settle a claim.
Because of these conflicting views, we remain neutral on HB 1841.