HBA-JRA C.S.S.B. 441 76(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.S.B. 441
By: Ellis
Ways & Means
5/21/1999
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Current law exempts the sale of certain items, such as certain food and
health care supplies, from limited sales, excise, and use taxes.  Because
this state currently has a budget surplus, this may be an appropriate time
to consider certain forms of tax relief.  C.S.S.B. 441 exempts the first
$25 of a monthly charge for the sale, use, or other consumption in this
state of Internet access service from limited sales, use, and excise tax
and exempts a certain percentage of the value of information services and
data processing services from limited sales, excise, and use tax based on
when such services are rendered. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not delegate any additional rulemaking authority to a state officer,
department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subchapter A, Chapter 151, Tax Code, by adding Sections
151.00393 and 151.00394, as follows: 

Sec. 151.00393.  INTERNET.  Defines "Internet."

Sec. 151.00394.  INTERNET ACCESS SERVICE.  Defines "Internet access
service." Provides that "Internet access service" is not included in the
definitions of data processing services and information services on and
after October 1, 1999. 

SECTION 2.  Amends Section 151.0101(a), Tax Code, to redefine "taxable
services" to include Internet access service and to exclude information
services and data processing services.  Makes conforming changes. 

SECTION 3.  Amends Subchapter A, Chapter 151, Tax Code, by adding Section
151.01011, as follows: 

Sec. 151.01011.  CERTAIN TEMPORARY TAXABLE SERVICES.  Defines "taxable
services" to include information services and data processing services.
Provides that this section expires October 1, 2003. 

SECTION 4.  Amends Section 151.0103, Tax Code, to redefine
"telecommunications services" to include Internet access service. 

SECTION 5.  Amends Section 151.320(b), Tax Code, to redefine "magazine" by
deleting the provision that "magazine" does not mean the publication of
current information which is taxable pursuant to Section 151.0038 of this
code as an "information service." 

SECTION 6.  Amends Subchapter H, Chapter 151, Tax Code, by adding Section
151.325, as follows: 

Sec. 151.325.  BASIC FEE FOR INTERNET ACCESS SERVICE.  Exempts the first
$25  of a monthly charge for the sale, use, or other consumption in this
state of Internet access service from limited sales, use, and excise tax.
Provides that this exemption applies without regard to whether the Internet
access service is bundled with another service, including any other taxable
service listed in Section 151.0101(a) or 151.01011, or the billing period
used by the service provider.  Provides that this exemption applies to the
total sales price the service provider charges for Internet access to a
purchaser, without regard to whether the service provider charges one
lump-sum amount or separately bills the purchaser for each user. 

SECTION 7.  Amends Subchapter H, Chapter 151, Tax Code, by adding Section
151.351, as follows: 

Sec. 151.351.  INFORMATION SERVICES AND DATA PROCESSING SERVICES. Exempts
20 percent of the value of information services and data processing
services rendered between January 1, 2000, and October 1, 2000, from
limited sales, excise, and use tax.  Exempts 40 percent of the value of
such services rendered between October 1, 2000, and October 1, 2001.
Exempts 60 percent of the value of such services rendered between October
1, 2001, and October 1, 2002.  Exempts 80 percent of the value of such
services rendered between October 1, 2002, and October 1, 2003.  Provides
that this section expires October 1, 2003. 

SECTION 8.  Repealer:  Sections 151.0035 ("Data Processing Service") and
151.0038 ("Information Service"), Tax Code. 

SECTION 9.  Effective date:  October 1, 1999, except that Sections 5 and 8
of this Act take effect October 1, 2003.  Makes application of this Act
prospective. 

SECTION 10.  Emergency clause.   

COMPARISON OF ORIGINAL TO SUBSTITUTE

The substitute adds new SECTIONS 1-8 and modifies the caption of the bill
accordingly.  For a complete analysis of these new sections, please see the
Section-by-Section Analysis portion of this document. 

The substitute deletes SECTION 1 of the original, which would have amended
Section 151.313(a), Tax Code, to add a drug or medicine, without regard to
whether it is prescribed or dispensed by a license practitioner of the
healing arts, labeled with a national drug code issued by the federal Food
and Drug Administration and specifically formulated and labeled for
children 12 years of age or younger, and diapers to a list of items exempt
from taxes imposed by this chapter (limited sales, excise, and use taxes).  

The substitute deletes SECTION 2 of the original, which would have amended
Subchapter H, Chapter 151, Tax Code, by adding Section 151.325 (Clothing
and Footwear for Limited Period) to exempt the sale of clothing or footwear
from taxes imposed by this chapter if the item is priced less than $200 and
the sale takes place between 12:01 a.m. on the first Saturday in August and
ending at 12 midnight on the second following Friday.  The proposed section
would have provided that this exemption does not apply to an article of
clothing or footwear designed and primarily used for athletic activity; nor
to accessories, including jewelry, handbags, luggage, umbrella, wallets,
watches, and similar items. 

The substitute redesignates SECTIONS 3 (effective date) and 4 (emergency
clause) of the original to SECTIONS 9 and 10 and makes conforming changes.