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SPONSOR: |
Cervantes |
DATE TYPED: |
|
HB |
843/aHTRC |
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SHORT TITLE: |
Border Trade Support Company Gross Receipts |
SB |
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ANALYST: |
Neel |
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REVENUE
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
FY03 |
FY04 |
|
|
|
|
NFI |
|
Recurring |
General Fund |
|
|
|
Recurring |
Local Governments ( |
|
|
|
|
|
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicates SB 492, Border Trade-Support
Gross Receipts
Relates to HB 823
Responses
Received From:
Taxation
and Revenue Department (TRD)
Economic
Development Department (EDD)
SUMMARY
Synopsis of HTRC
Amendment
The deduction is limited to businesses locating in
the state after
According
to TRD, the fiscal impact estimate assumes no multiplier effects associated
with increased border trade activity. Since the department does not have enough
information about individual businesses to determine whether a particular
incentive is the key factor influencing the decision to locate in the state, we
assume the level of economic activity is unaffected by the passage of any
individual piece of legislation.
Synopsis
of Original Bill
House Bill 843 enacts a
new section of the Gross Receipts and Compensating Tax Act to provide a gross
receipts tax deduction for receipts of a border trade-support company located
within twenty miles of a port of entry on
·
the
company first locates in
·
the
receipts are received within a five-year period beginning on the date the
company locates in
·
the
company employs at least two employees in
A “port of entry” is
defined as an international port of entry in
A trade support company is defined to include
customs brokerage firms, freight forwarders, third-party logistics firms,
trucking cross-dock operations and other similar businesses. The inclusion of “other similar businesses”
may create some problems with administering the deduction. Loose definitions do not work well in tax
law. Care should always be taken to establish “bright lines” in the tax code in
order to avoid confusion, protest and litigation
Significant
Issues
·
This
proposal is targeted to benefit a handful of companies. Targeting tax incentives to specific businesses
is not good tax policy. It increases complexity and sets a precedent that other
businesses can use to obtain similar favors.
·
This
proposal represents further erosion of the principle that everyone engaging in
business should be subject to the gross receipts tax.
·
The “Blue Ribbon Tax Reform Commission” is scheduled
to make its tax policy recommendations no later than
FISCAL IMPLICATIONS
TRD notes the following assumptions:
·
A trade support company is defined to include customs brokerage firms,
freight forwarders, third-party logistics firms, trucking cross-dock operations
and other similar businesses. The
inclusion of “other similar businesses” in the list of establishments qualifying
for deduction may open the door for such activities as warehousing, computer systems
consulting and management, legal services and industrial planning, among other
business services.
·
The deduction is limited to businesses established after
SN/njw