NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.



Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Suite 101 of the State Capitol Building North.





F I S C A L I M P A C T R E P O R T





SPONSOR: Ingle DATE TYPED: 03/28/00 HB
SHORT TITLE: Clothing and Footwear Tax Deduction SB 25
ANALYST: Eaton




REVENUE



Estimated Revenue
 Subsequent

Years Impact

 Recurring

or Non-Rec

 Fund

Affected

FY00 FY01
$ (970.0) Recurring General Fund
$ (670.0) Recurring Local Govts.

(Parenthesis ( ) Indicate Revenue Decreases)



SOURCES OF INFORMATION



Taxation and Revenue Department (TRD)



SUMMARY



Synopsis of Bill



This bill provides an annual gross receipts tax holiday for sales of qualified clothing and footwear during a three-day period in August prior to the beginning of each school year. This holiday is accomplished through a gross receipts tax deduction. To qualify for the deduction, individual items must be purchased at a price of less than $100. The provisions of the bill are not meant to apply to sales of specialized athletic/protective gear, accessories or rental of clothing. The proposed tax holiday is similar to programs currently administered in Florida, New York, and Texas.



The bill would take effect July 1, 2000.

FISCAL IMPLICATIONS



The fiscal impact was estimated by TRD in the second regular session of the 44th Legislature that was introduced as Senate Bill 149. The estimated impact was calculated by examining reports from the Texas State Comptroller's Office and the U.S. Bureau of Labor Statistics' 1998 Consumer Expenditure Survey as well as in-house sources. Data extrapolated implies that New Mexico would have a 75% increase in sales due to the deduction. It is estimated that this proposal will reduce New Mexico state and local gross receipts tax collections by approximately $1.6 million.



ADMINISTRATIVE IMPLICATIONS



Administrative impact on the Department would be significant. Extensive regulations must be developed. Taxpayer instructions, including itemized lists detailing the taxable status of equivocal clothing/footwear, must be written and promulgated.



TECHNICAL ISSUES



TRD suggests that it might be prudent to enact this legislation with a sunset so that the legislature would have an opportunity to decide whether or not to continue based on the experience.



JE/gm