84(R) - 2015
House Ways & Means
House Ways & Means
Relating to the application of the sales and use tax to the lease or rental to a full service event business of certain tangible personal property.
A fiscal note dated April 6, 2015 anticipates a negtive two-year net impact to General Revenue Related Fund of $8,600,000 through the biennium ending August 31, 2017, if the bill takes effect immediate effect; or a negative impact of $7,700,000 through the biennium ending August 31, 2017, if the effective date of the bill is September 1, 2015.
House Bill 2844 would amend Section 151.006 of the Tax Code related to sale for resale in the context of the sales and use tax to include as a sale for resale the lease or rental of reusable tangible personal property to a full service event business if it uses the property in a sale of a taxable item.
Full service event business would be define as a person engaged in the business of preparing and serving meals, drinks, or other food products for events held at locations chosen by customers, and that also provides at least one of the following: staff, rentals of tangible personal property, design elements or floral items.
Vote Recommendation Notes
Under current law, the sale for resale of a taxable item is exempt from the sales and use tax (Section 151.302 of the Tax Code).
The sale-for-resale exemption is based on the idea that only the end user of a taxable item or service should be taxed on it. This prevents the tax from adding up at each step of the sale process, with the cost being passed on to the final user in the form of a higher price on the item.
House Bill 2844 would rightly apply the sale-for-resale exemption to the lease or rental of
reusable tangible personal property to a full service event
business if the full service event business uses the property in a
sale of a taxable item. Since the lease or rental of the reusable tangible personal property would be used in order to provide the final service to the customer, House Bill 2844 would prevent the sales tax from adding up for the final customers on the price of the service the customer pays for. It would, as a consequence, limit the scope of government. We support this bill.