HBA-RBT H.B. 2406 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2406 By: Cuellar Ways & Means 3/19/1999 Introduced BACKGROUND AND PURPOSE Export items are exempt from the sales and use tax. Currently, many brokers are executing export documentation forms and delivering them to the customers prior to export. The form is not supposed to be executed until after visual verification of export. Customers can take these invalid certificates to the store and redeem their tax even though they have never left the country. Stores are allowed to refund the tax if the customer has a valid certificate. H.B. 2406 eliminates the broker's individual responsibility to verify exports by empowering them as a group to collectively verify exports. Under H.B. 2406, brokers may organize and rent locations approved by the comptroller to verify exports. This bill implements distinctions between retailers located in counties that do or do not border the United Mexican States and the different time periods that must elapse before the retailers may refund the tax paid. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the comptroller in SECTION 2 (Section 151.1575, Tax Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Sections 151.157(c), (e), (g), and (h), Tax Code, as follows: (c) Prohibits a customs broker from having more than five places of business in this state. (e) Requires the customs broker to keep the books and records described by this subsection for at least three years, rather than two. (g) Deletes existing text of Subsection (g) relating to a customs broker's authorization of an independent contractor to certify that tangible personal property has been exported outside of the United States. Redesignates Subsection (h) to Subsection (g). SECTION 2. Amends Subchapter E, Chapter 151, Tax Code, by adding Section 151.1575, as follows: Sec. 151.1575. OFFICIAL VERIFICATION LOCATION. (a) Authorizes a person to apply for designation as an official verification location under specified conditions. (b) Requires the comptroller to request a municipality to designate one person in the municipality that the municipality considers appropriate to be the only official verification location in that municipality. Authorizes the comptroller to designate the person approved by the municipality as the only official verification location in that municipality. Requires the comptroller by rule to prescribe qualifications for designation and the procedures for designation. Requires the comptroller to give priority to applicants who propose locating at an airport or close to the border between this state and the United Mexican States. Provides that if the comptroller designates one location under this subsection, the contract required by Subsection (c) between the location and each customs broker must provide that the customs broker will pay the monthly costs of the location in accordance with the ratio that the number of export vouchers submitted to that location by the broker during that month bears to the total number of export vouchers submitted to that location by all brokers during that month. (c) Requires each customs broker doing business in a municipality to contract with an official verification location in the municipality to verify that tangible personal property is exported outside this state. Provides that the comptroller must approve the contract in writing. (d) Requires the comptroller to assign each customs broker in a municipality a unique color or other designation that the broker must use in printing export vouchers. Sets forth the duties of the official verification location upon receipt of a voucher. (e) Prohibits the customs broker from issuing documentation to show exemption of tangible personal property unless the broker receives a stamped export voucher verifying exportation of that property in accordance with Subsection (d). Requires the customs broker to attach the stamped export voucher to the documentation. (f) Requires an official verification location to make available to the comptroller, within 15 days of receiving written notice from the comptroller, the location's books and records relating to the business of verifying the export of tangible personal property beyond the territorial limits of the United States for the purpose of exempting the property from the taxes imposed by this chapter. Requires the location to make the location's books and records available to the comptroller without notice if the comptroller determines that providing notice will jeopardize the comptroller's ability to administer and effectively enforce the provisions of this chapter relating to verification of the exemption of tangible personal property. Requires the location to keep the books and records described by this subsection for at least three years after the date of the last entry that they contain. (g) Requires each customs broker doing business in a municipality in which the comptroller does not designate an official verification location to perform the duties of an official verification location in relation to that broker's business in that municipality. SECTION 3. Amends Sections 151.158(c), (e), and (f), Tax Code, to require the comptroller to require that the stamps be manufactured so that a stamp may be easily and securely attached to an export voucher, rather than export documentation. Authorizes the comptroller to provide stamps only to an official verification location, rather than a licensed customs broker. Makes conforming changes. SECTION 4. Amends Section 151.159(b), Tax Code, to make a conforming change. SECTION 5. Amends Sections 151.307, Tax Code, by amending Subsections (b), (c), and (d), and adding Subsections (e) and (f), to set forth the circumstances under which a retailer who receives documentation is prohibited from refunding tax paid under this chapter. Provides that a retailer who makes a refund before the prescribed time, makes an undocumented refund, or makes a refund that is improperly documented is liable for the amount of the tax refunded with interest. Redesignates Subsection (d) to (f). Makes conforming changes. SECTION 6. Amends Sections 151.712(a), (b), (f), (g), and (i), Tax Code, as follows: (a) Makes a conforming change. (b) Makes conforming and nonsubstantive changes. (f) Requires the comptroller to require a person to pay to the state any tax revenue lost to this state due to the person's action with interest. Authorizes the comptroller to suspend or revoke the designation of an official verification location. (g) Makes a conforming change. (i) Defines "authorized," "customs broker," and "official verification location." SECTION 7. Amends Sections 151.713(a), (g), and (h), Tax Code, as follows: (a) Makes conforming changes. (g) Requires the comptroller to require a person to pay to the state any tax revenue lost to this state due to the person's actions. Makes a conforming change. (h) Defines "authorized," "customs broker," and "official verification location." SECTION 8. Effective date: September 1, 1999. Makes application of this Act prospective to exemptions to the sales and use tax imposed under Chapter 151, Tax Code, claimed on or after January 1, 2000. SECTION 9. Emergency clause.