84(R) - 2015
Relating to the amount of a sales and use tax refund for tangible personal property used to provide cable television service, Internet access service, or telecommunications services.
A fiscal note dated May 15, 2015 anticipates a negative two-year net impact to General Revenue Related Funds from CSSB 1009 of $50,000,000 through the biennium ending August 31, 2017.
Senate Bill 1009 would amend Section 151.3186(d) of the Tax Code to increase from $50 million to $75 million the maximum annual amount of refunds of state sales and use tax given to providers of cable television service, Internet access service, or telecommunications under this section.
Companion bill HB 2199 is similar but not identical to Senate Bill 1009.
Vote Recommendation Notes
No amendments have been introduced on the Senate floor and no changes have been made to the bill in House committee. We continue to support it.
The second chamber sponsor is Representative Tan Parker.
First chamber recommendation:
Under current law, Section 151.3186 of the Tax Code, providers of cable television service, Internet access service, or telecommunications services are entitled to a refund of the sales tax on the sale, lease, or rental or storage, use, or other consumption of tangible personal property in certain conditions. They are currently either entitled to a full refund of the tax paid on eligible property in a calendar year if the total amount of tax paid by all providers and subsidiaries that are eligible for a refund is not more than $50 million for the calendar year. If the total amount exceeds $50 million, they are entitled to a pro rata share of $50 million.
Senate Bill 1009 would increase the limit on total amount of tax paid by all providers and subsidiaries that are eligible for a refund to $75 million, allowing for more refunds to be given (up to $75 million as opposed to $50 million currently).
According to the fiscal note, requests for refunds based on four months of activity in calendar year 2013 were in excess of the current $50 million annual limit. Consequently, it is expected that requests for refunds based on full years of activity will exceed the proposed $75 million limit, and the amount of refunds paid each year under the section will be $75 million.
The refund is provided only when the property is sold, leased, or rented to or stored, used, or consumed by a provider or a subsidiary of a provider and the property is directly used or consumed by the provider or subsidiary in or during the distribution of cable television service, the provision of Internet access service, or the transmission, conveyance, routing, or reception of telecommunications services.
In that sense, this refund follow the spirit behind exempting from the sales tax manufacturing equipment, or goods and services used in the manufacturing process, because the tax represents an additional cost for a producer and this cost would be taken into consideration in pricing the final product, which in turn would be taxed again, increasing the price for final consumers.
In order to avoid this situation, manufacturing equipment and goods or services used in the manufacturing process of other products for sale, are exempt from the sales and use tax to prevent the final products or services from being taxed several times (as the sales and use tax will generally apply to the final products or services).
Senate Bill 1009 would follow this spirit and as a consequence, we support it.
We supported a similar bill in the House, HB 2199, that increased the limit on total amount of tax paid by all providers and subsidiaries that are eligible for a refund to $150 million.