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 for other purposes.
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SPONSOR: |
Smith |
DATE
TYPED: |
|
HB |
|
||
SHORT
TITLE: |
Border
Trade-Support Gross Receipts |
SB |
492/aSFC |
||||
|
ANALYST: |
Neel |
|||||
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)
Responses
Received From
TRD
SUMMARY
Synopsis
of SFC 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, it
is assumed the level of economic activity is unaffected by the passage of any
individual piece of legislation.
Synopsis of Original Bill
Senate Bill 492 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
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
OTHER
SUBSTANTIVE ISSUES
TRD
makes the following tax policy arguments:
·
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
·
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.
SS/njw