HBA-AMW S.B. 1114 77(R)    BILL ANALYSIS


Office of House Bill AnalysisS.B. 1114
By: Brown, J. E. "Buster"
Ways & Means
5/7/2001
Engrossed



BACKGROUND AND PURPOSE 

Currently, some indirect purchases of tangible personal property under
contracts with the federal government for space flight activities are
subject to sales and use taxes because there is no "resale" to the federal
government.  This has been the interpretation although title to tangible
personal property passes directly to the federal government because a sale
includes transfer of title under the contract and the applicable federal
acquisition regulations.  Senate Bill 1114 clarifies the applicability of
the exemption with respect to tangible personal property used or consumed
in the performance of federal space flight contracts and extends similar
treatment to taxable services used in the performance of such contracts. 

RULEMAKING AUTHORITY

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

ANALYSIS

Senate Bill 1114 amends the Tax Code to provide that the sale, lease,
rental, storage, use, or consumption of a taxable item that is used or
consumed by a person in the performance of a space flight contract is
exempt from limited sales, excise, and use taxes (exempt item) and that the
person who uses or consumes the item may claim a refund, if the exempt item
is included as an allowable direct or indirect item of cost under
regulations relating to the federal acquisition regulations system or
similar federal regulations, regardless of whether the contract is a
cost-reimbursement contract.   

The bill authorizes a person who is eligible to claim a refund to apply to
the comptroller of public accounts (comptroller) not later than March 31
for a refund of taxes paid during the preceding calendar year on tax exempt
items.  The bill requires the comptroller to determine the total amount of
valid claims for refunds of taxes paid during the preceding calendar year
and, not later than May 30, send to each applicant who submits a valid
refund claim the full amount of the refund if the total amount of valid
claims for refunds of taxes paid during the preceding calendar year does
not exceed $800,000 or a portion of that refund if the total amount of
valid claims for refunds of taxes paid during the preceding calendar year
exceeds $800,000. 

The bill establishes a formula for determining the amount of a refund for
which the total amount of valid claims during the preceding year exceeds
$800,000.  The bill provides that a valid refund claim draws interest,
beginning on the later of March 31 of the year in which the claim is filed
or the 61st day after the date the claim is filed, at the prime rate plus
one percent, as published in the Wall Street Journal on the first day of
each calendar year that is not a Saturday, Sunday, or legal holiday.  The
bill specifies that this exemption does not apply to a part of direct or
indirect costs allocated to a contract that is not a space flight contract. 

EFFECTIVE DATE

September 1, 2003, if the Act receives a majority vote of the members
elected to each house during the 78th Legislature, Regular Session, 2003.