[1] NOTE:  As provided in LFC policy, this report is intended only 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.

 

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

 

 

SPONSOR:

Cravens

 

DATE TYPED:

1-30-02

 

HJM

 

 

SHORT TITLE:

Direct Sellers Commissions Tax Deduction

 

SB

246

 

 

ANALYST:

Neel

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY02

FY03

 

 

 

 

($1,054.0)

($1,150.0)

Recurring

General Fund

 

   ($866.0)

($945.0)

Recurring

Local Governments

(Parenthesis ( ) Indicate Revenue Decreases)

                                                                                                                                                                                                                                                                                   

SOURCES OF INFORMATION

 

LFC files

Taxation and Revenue Department (TRD)

 

SUMMARY

 

     Synopsis of Bill

 

Senate Bill 246 amends statute to allow a deduction from gross receipts for commissions paid to direct sellers.  SB 246 further specifies that direct sellers are defined in Section 3508 of the Internal Revenue Code of 1986.   “Direct sellers” as defined in federal code, are independent contractors “engaged in selling consumer products in the home or otherwise than in a permanent retail establishment.” 

                                                                                                                                                                             

FISCAL IMPACT

 

TRD’s assumptions include:

 

The fiscal impact was derived using data from the 1997 Census of Trade in New Mexico.  In 1997, there were 208 “Direct Selling Establishments”—a subset of the category “Non-store Retailers”. Total receipts and payroll for this category were $202 million and  $25 million, respectively.   Using payroll as a proxy for commission sales and assuming an average annual growth rate of 6%, the FY 2003 base is estimated to be approximately $34 million.  An effective state and local tax rate of 6.06% yields the fiscal impact illustrated above. 

 

SN/njw

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