LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 85TH LEGISLATIVE REGULAR SESSION March 15, 2017 TO: Honorable Dennis Bonnen, Chair, House Committee on Ways & Means FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB350 by Canales (Relating to exempting textbooks purchased, used, or consumed by university and college students from the sales and use tax for limited periods.), As Introduced Estimated Two-year Net Impact to General Revenue Related Funds for HB350, As Introduced: a negative impact of ($52,500,000) through the biennium ending August 31, 2019.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 85TH LEGISLATIVE REGULAR SESSION
March 15, 2017
TO: Honorable Dennis Bonnen, Chair, House Committee on Ways & Means FROM: Ursula Parks, Director, Legislative Budget Board IN RE:HB350 by Canales (Relating to exempting textbooks purchased, used, or consumed by university and college students from the sales and use tax for limited periods.), As Introduced
TO: Honorable Dennis Bonnen, Chair, House Committee on Ways & Means
FROM: Ursula Parks, Director, Legislative Budget Board
IN RE: HB350 by Canales (Relating to exempting textbooks purchased, used, or consumed by university and college students from the sales and use tax for limited periods.), As Introduced
Honorable Dennis Bonnen, Chair, House Committee on Ways & Means
Honorable Dennis Bonnen, Chair, House Committee on Ways & Means
Ursula Parks, Director, Legislative Budget Board
Ursula Parks, Director, Legislative Budget Board
HB350 by Canales (Relating to exempting textbooks purchased, used, or consumed by university and college students from the sales and use tax for limited periods.), As Introduced
HB350 by Canales (Relating to exempting textbooks purchased, used, or consumed by university and college students from the sales and use tax for limited periods.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB350, As Introduced: a negative impact of ($52,500,000) through the biennium ending August 31, 2019.
Estimated Two-year Net Impact to General Revenue Related Funds for HB350, As Introduced: a negative impact of ($52,500,000) through the biennium ending August 31, 2019.
General Revenue-Related Funds, Five-Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2018 $0 2019 ($52,500,000) 2020 ($52,800,000) 2021 ($53,300,000) 2022 ($53,800,000)
2018 $0
2019 ($52,500,000)
2020 ($52,800,000)
2021 ($53,300,000)
2022 ($53,800,000)
General Revenue-Related Funds, Five-Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds 2018 $0 2019 ($52,200,000) 2020 ($52,800,000) 2021 ($53,300,000) 2022 ($53,800,000)
2018 $0
2019 ($52,200,000)
2020 ($52,800,000)
2021 ($53,300,000)
2022 ($53,800,000)
All Funds, Five-Year Impact: Fiscal Year Probable Revenue (Loss) fromGeneral Revenue Fund1 Probable Revenue (Loss) fromState Highway Fund6 Probable Revenue (Loss) fromCities Probable Revenue (Loss) fromTransit Authorities 2018 $0 ($51,700,000) ($9,900,000) ($3,400,000) 2019 ($52,500,000) $0 ($10,000,000) ($3,500,000) 2020 ($52,800,000) $0 ($10,100,000) ($3,500,000) 2021 ($53,300,000) $0 ($10,200,000) ($3,500,000) 2022 ($53,800,000) $0 ($10,300,000) ($3,600,000) Fiscal Year Probable Revenue (Loss) fromCounties and Special Districts 2018 ($1,800,000) 2019 ($1,800,000) 2020 ($1,800,000) 2021 ($1,900,000) 2022 ($1,900,000) The above table assumes an effective date of July 1, 2017. The below table assumes an effective date of October 1, 2017. Fiscal Year Probable Revenue Gain/(Loss) fromGeneral Revenue Fund1 Probable Revenue Gain/(Loss) fromState Highway Fund6 Probable Revenue Gain/(Loss) fromCities Probable Revenue Gain/(Loss) fromTransit Authorities 2018 $0 ($25,850,000) ($5,000,000) ($1,700,000) 2019 ($52,200,000) $0 ($10,000,000) ($3,500,000) 2020 ($52,800,000) $0 ($10,100,000) ($3,500,000) 2021 ($53,300,000) $0 ($10,200,000) ($3,500,000) 2022 ($53,800,000) $0 ($10,300,000) ($3,600,000) Fiscal Year Probable Revenue Gain/(Loss) fromCounties and Special Districts 2018 ($900,000) 2019 ($1,800,000) 2020 ($1,800,000) 2021 ($1,900,000) 2022 ($1,900,000) Fiscal Analysis The bill would amend Chapter 151 of the Tax Code by adding Section 151.3212 to provide for the exemption from the sales and use tax of books written, designed, and produced for educational, instructional, or pedagogical purposes, when purchased by a student enrolled at a Texas institution of higher education. The sale would take place within a seven-day period each August and January, as designated by the Comptroller, when the greatest number of books is likely to be purchased. A person would establish eligibility for the exemption by presenting a valid student identification card. The Comptroller would by rule prescribe electronic means for establishing eligibility for online purchases. The bill would take effect July 1, 2017, assuming that it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect October 1, 2017. Methodology The following data were used to estimate college students spending on textbooks: higher education student enrollment and characteristics data from the Texas Higher Education Coordinating Board, and average annual college student expenditures for required course materials from the National Association of College Stores. Estimated book sales were adjusted for the exemption period, multiplied by the sales tax rate, adjusted for potential effective dates for the bill of July 1, 2017 and October 1, 2017, and extrapolated through fiscal 2022. If the bill were to take effect immediately, student textbooks would be eligible for exemption during the August 2017 tax holiday. In the event the bill fails to take immediate effect, the first exemption period would be in January 2018. Pursuant to Proposition 7 (2015), any sales tax collections in excess of $28 billion and less than$30.5 billion will be deposited into the State Highway Fund. Because total 2018 collections areprojected to fall in that range, the 2018 revenue loss is from the State Highway Fund instead ofGeneral Revenue. Local Government Impact There would be a corresponding loss of sales and tax revenue from units of local government. The estimated losses are displayed in the above tables. Source Agencies:304 Comptroller of Public Accounts LBB Staff: UP, KK, SD
Fiscal Year Probable Revenue (Loss) fromGeneral Revenue Fund1 Probable Revenue (Loss) fromState Highway Fund6 Probable Revenue (Loss) fromCities Probable Revenue (Loss) fromTransit Authorities 2018 $0 ($51,700,000) ($9,900,000) ($3,400,000) 2019 ($52,500,000) $0 ($10,000,000) ($3,500,000) 2020 ($52,800,000) $0 ($10,100,000) ($3,500,000) 2021 ($53,300,000) $0 ($10,200,000) ($3,500,000) 2022 ($53,800,000) $0 ($10,300,000) ($3,600,000)
2018 $0 ($51,700,000) ($9,900,000) ($3,400,000)
2019 ($52,500,000) $0 ($10,000,000) ($3,500,000)
2020 ($52,800,000) $0 ($10,100,000) ($3,500,000)
2021 ($53,300,000) $0 ($10,200,000) ($3,500,000)
2022 ($53,800,000) $0 ($10,300,000) ($3,600,000)
Fiscal Year Probable Revenue (Loss) fromCounties and Special Districts 2018 ($1,800,000) 2019 ($1,800,000) 2020 ($1,800,000) 2021 ($1,900,000) 2022 ($1,900,000)
2018 ($1,800,000)
2019 ($1,800,000)
2020 ($1,800,000)
2021 ($1,900,000)
2022 ($1,900,000)
The above table assumes an effective date of July 1, 2017. The below table assumes an effective date of October 1, 2017.
Fiscal Year Probable Revenue Gain/(Loss) fromGeneral Revenue Fund1 Probable Revenue Gain/(Loss) fromState Highway Fund6 Probable Revenue Gain/(Loss) fromCities Probable Revenue Gain/(Loss) fromTransit Authorities 2018 $0 ($25,850,000) ($5,000,000) ($1,700,000) 2019 ($52,200,000) $0 ($10,000,000) ($3,500,000) 2020 ($52,800,000) $0 ($10,100,000) ($3,500,000) 2021 ($53,300,000) $0 ($10,200,000) ($3,500,000) 2022 ($53,800,000) $0 ($10,300,000) ($3,600,000) Fiscal Year Probable Revenue Gain/(Loss) fromCounties and Special Districts 2018 ($900,000) 2019 ($1,800,000) 2020 ($1,800,000) 2021 ($1,900,000) 2022 ($1,900,000) Fiscal Analysis The bill would amend Chapter 151 of the Tax Code by adding Section 151.3212 to provide for the exemption from the sales and use tax of books written, designed, and produced for educational, instructional, or pedagogical purposes, when purchased by a student enrolled at a Texas institution of higher education. The sale would take place within a seven-day period each August and January, as designated by the Comptroller, when the greatest number of books is likely to be purchased. A person would establish eligibility for the exemption by presenting a valid student identification card. The Comptroller would by rule prescribe electronic means for establishing eligibility for online purchases. The bill would take effect July 1, 2017, assuming that it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect October 1, 2017. Methodology The following data were used to estimate college students spending on textbooks: higher education student enrollment and characteristics data from the Texas Higher Education Coordinating Board, and average annual college student expenditures for required course materials from the National Association of College Stores. Estimated book sales were adjusted for the exemption period, multiplied by the sales tax rate, adjusted for potential effective dates for the bill of July 1, 2017 and October 1, 2017, and extrapolated through fiscal 2022. If the bill were to take effect immediately, student textbooks would be eligible for exemption during the August 2017 tax holiday. In the event the bill fails to take immediate effect, the first exemption period would be in January 2018. Pursuant to Proposition 7 (2015), any sales tax collections in excess of $28 billion and less than$30.5 billion will be deposited into the State Highway Fund. Because total 2018 collections areprojected to fall in that range, the 2018 revenue loss is from the State Highway Fund instead ofGeneral Revenue.
Fiscal Year Probable Revenue Gain/(Loss) fromGeneral Revenue Fund1 Probable Revenue Gain/(Loss) fromState Highway Fund6 Probable Revenue Gain/(Loss) fromCities Probable Revenue Gain/(Loss) fromTransit Authorities 2018 $0 ($25,850,000) ($5,000,000) ($1,700,000) 2019 ($52,200,000) $0 ($10,000,000) ($3,500,000) 2020 ($52,800,000) $0 ($10,100,000) ($3,500,000) 2021 ($53,300,000) $0 ($10,200,000) ($3,500,000) 2022 ($53,800,000) $0 ($10,300,000) ($3,600,000)
2018 $0 ($25,850,000) ($5,000,000) ($1,700,000)
2019 ($52,200,000) $0 ($10,000,000) ($3,500,000)
2020 ($52,800,000) $0 ($10,100,000) ($3,500,000)
2021 ($53,300,000) $0 ($10,200,000) ($3,500,000)
2022 ($53,800,000) $0 ($10,300,000) ($3,600,000)
Fiscal Year Probable Revenue Gain/(Loss) fromCounties and Special Districts 2018 ($900,000) 2019 ($1,800,000) 2020 ($1,800,000) 2021 ($1,900,000) 2022 ($1,900,000)
2018 ($900,000)
2019 ($1,800,000)
2020 ($1,800,000)
2021 ($1,900,000)
2022 ($1,900,000)
Fiscal Analysis
The bill would amend Chapter 151 of the Tax Code by adding Section 151.3212 to provide for the exemption from the sales and use tax of books written, designed, and produced for educational, instructional, or pedagogical purposes, when purchased by a student enrolled at a Texas institution of higher education. The sale would take place within a seven-day period each August and January, as designated by the Comptroller, when the greatest number of books is likely to be purchased. A person would establish eligibility for the exemption by presenting a valid student identification card. The Comptroller would by rule prescribe electronic means for establishing eligibility for online purchases. The bill would take effect July 1, 2017, assuming that it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect October 1, 2017.
Methodology
The following data were used to estimate college students spending on textbooks: higher education student enrollment and characteristics data from the Texas Higher Education Coordinating Board, and average annual college student expenditures for required course materials from the National Association of College Stores. Estimated book sales were adjusted for the exemption period, multiplied by the sales tax rate, adjusted for potential effective dates for the bill of July 1, 2017 and October 1, 2017, and extrapolated through fiscal 2022. If the bill were to take effect immediately, student textbooks would be eligible for exemption during the August 2017 tax holiday. In the event the bill fails to take immediate effect, the first exemption period would be in January 2018. Pursuant to Proposition 7 (2015), any sales tax collections in excess of $28 billion and less than$30.5 billion will be deposited into the State Highway Fund. Because total 2018 collections areprojected to fall in that range, the 2018 revenue loss is from the State Highway Fund instead ofGeneral Revenue.
Local Government Impact
There would be a corresponding loss of sales and tax revenue from units of local government. The estimated losses are displayed in the above tables.
Source Agencies: 304 Comptroller of Public Accounts
304 Comptroller of Public Accounts
LBB Staff: UP, KK, SD
UP, KK, SD