HBA-JRA C.S.H.B. 2280 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 2280 By: Dutton Ways & Means 4/9/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE The suspension of sales tax may encourage consumers to make purchases that they might not otherwise make. C.S.H.B. 2280 exempts from limited sales, use, and excise taxes, the purchase of certain clothing, footwear, and school supplies that cost less than $75 during a specified two-week period in August, and provides that an exemption to Chapter 151, Tax Code, does not apply to local sales and use taxes administered and computed under Subtitle C (Local Sales and Use Tax), Tax Code. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Comptroller of Public Accounts in SECTION 4 of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter H, Chapter 151, Tax Code, by adding Section 151.325, as follows: Sec. 151.325. CLOTHING AND FOOTWEAR FOR LIMITED PERIOD. (a) Exempts the sale of an article of clothing or footwear designed to be worn on or about the human body from limited sales, use, and excise taxes if the article costs less than $75 and is purchased during a specified two-week period in August. (b) Provides that this section does not apply to any special clothing or footwear primarily designed for athletic activity or protective use that is not normally worn except when used for the athletic activity or protective use for which it is designed, accessories, and the rental of clothing or footwear. (c) Authorizes the governing body of a local taxing authority to repeal the application of this exemption in the manner provided by Chapter 326 on or after January 1, 2000. SECTION 2. Amends Section 151.3111(b), Tax Code, to provide that Subsection (a) of this section (providing an exemption from limited sales, excise, and use tax) does not apply to performance of a service on tangible personal property exempt under Section 151.325. SECTION 3. Amends Subtitle C, Title 3, Tax Code, by adding Chapter 326, as follows: CHAPTER 326. STATE SALES AND USE TAX EXEMPTIONS IN RELATION TO LOCAL SALES AND USE TAXES Sec. 326.001. APPLICABILITY. Makes this section applicable to local sales and use taxes administered and computed under this subtitle (Local Sales and Use Tax) and to which this subtitle applies, including a tax imposed under Chapters 285 (Special Provisions Relating to Hospital Districts), 775 (Emergency Services Districts), or 776 (Emergency Services Districts in Counties of 125,000 or Less), Health and Safety Code; Chapters 326 (Library Districts), 334 (Sports And Community Venues), 363 (Crime Control And Prevention Districts), 377 (Municipal Development Districts), or 383 (County Development Districts), Local Government Code; Chapters 451 (Metropolitan Rapid Transit Authorities), 452 (Regional Transportation Authorities), 453 (Municipal Transit Departments), or 457 (County Mass Transit Authority), Transportation Code; or Article 5190.6, V.T.C.S. (Development Corporation Act of 1979). Sec. 326.002. STATE EXEMPTIONS. Provides that an exemption to Chapter 151 does not apply to a local sales and use tax to which this chapter applies if the governing body of the local taxing authority repeals the exemption and the exemption provided by Chapter 151 specifically authorizes the governing body of the local taxing authority to repeal the exemption. Sec. 326.003. REPEAL BY LOCAL TAXING AUTHORITY. Authorizes the governing body of a taxing authority to adopt an appropriate order by a majority vote to repeal the application of an exemption described by Section 326.002. Provides that a governing body must hold a public hearing before the vote. Authorizes a taxing authority to reinstate the exemption in the same manner. Provides that a vote to repeal or reinstate the exemption must be entered in the minutes for the meeting. Requires the taxing authority to send to the comptroller by certified or registered mail a copy of the order adopted under this section. Sec. 326.004. EFFECTIVE DATE. Provides that the repeal or reinstatement of the exemption takes effect within the taxing authority on the first day of the first calendar quarter occurring after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives a copy of the order. SECTION 4. Authorizes the comptroller to adopt emergency rules for the implementation of this Act. SECTION 5. Effective date: 90 days after adjournment. Makes application of this Act prospective. SECTION 6. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original in SECTION 1 by changing the title of proposed Section 151.325 to "Clothing and Footwear for Limited Period" from "Certain Priced Children's Clothing or Footwear; Fabrics." Deletes the requirement that the clothing or footwear be children's or youth's clothing or footwear to qualify for the exemption. Decreases the price limit on exempt clothing or footwear from $100 to $75. Provides that in order to qualify for the exemption such a sale must take place during a specified two-week period of August, rather than during the month of August. Adds the rental of clothing or footwear to the items to which this section does not apply. Authorizes the governing body of a local taxing authority to repeal the application of this exemption in the manner provided by Chapter 326 on or after January 1, 2000. Deletes proposed Subsection (c) of the original, which similarly exempted the sale of tangible personal property intended to be a component part of an article of clothing or footwear from the limited sales, excise, and use tax. Deletes proposed Subsection (d) of the original, which provided that an exemption certificate in which the purchaser certifies that the article is to be worn by a child or youth is sufficient to establish that fact. The substitute deletes proposed SECTION 2, which added Section 151.326, Tax Code, to exempt certain school supplies from the limited sales, excise, and use tax. The substitute adds a new SECTION 2, which amends Section 151.3111(b), Tax Code, to provide that Subsection (a) of this section (providing an exemption from limited sales, excise, and use tax) does not apply to performance of a service on tangible personal property exempt under Section 151.325. The substitute adds a new SECTION 3, which adds Chapter 326 (State Sales And Use Tax Exemptions in Relation to Local Sales And Use Taxes), Tax Code, to provide that an exemption to Chapter 151, Tax Code, does not apply to local sales and use taxes administered and computed under Subtitle C (Local Sales and Use Tax), Tax Code. The substitute adds a new SECTION 4 to authorize the comptroller to adopt emergency rules for the implementation of this Act. The substitute redesignates SECTIONS 3 and 4 of the original to SECTIONS 5 and 6 of the substitute.