BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  2

DATE:  February 17, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	JOHN J. CHAVEZ, SECRETARY   
BILL NUMBER:  HB - 799

SPONSOR:  Representative Sandoval

BILL SHORT TITLE: Governmental Gross Receipts Tax Deduction for Textbooks and Materials Required for Courses at a Post-Secondary Institution

DESCRIPTION:  This bill proposes a deduction governmental gross receipts tax for receipts from sale of textbooks and other materials required for a course at a post-secondary institution. The college or university must be the operator of the bookstore and the student must display a “valid student identification card”. Apparently, only the bookstore at UNM would currently qualify for  this deduction. All other institutions close their bookstores during “book week” so there is no GGRT on textbooks.

EFFECTIVE DATE:  July 1, 2001

FISCAL IMPACT (Thousands of dollars):  		Note: Parenthesis ( ) indicate a revenue loss:
	Estimated Impact on Revenues	Recurring or		
	  		Nonrecurring	Funds 	
	  FY 2002  	  Full Year   	    Impact     	             Affected             	
Governmental Gross Receipts	(110)
(320)	(120)
(350)	Recurring
Recurring	EMNRD
NMFA	

ADMINISTRATIVE IMPACT: minimal impact on Department. This is not a systems issue but an audit and compliance issue. Department must promulgate regulations and ensure compliance through audit

TECHNICAL ISSUES:  
1.	This bill permits the deduction for textbooks and other required materials. This avoids a controversy over what constitutes a textbook, at the cost of deciding what is “required”. Many course instructors provide for required materials and optional, but recommended, material including sometimes the textbook.

2.	Bonds have been sold against GGRT receipts with covenants that promise the state will not take any material action to compromise the tax base or yield.  The state has pledged not to compromise the revenue stream. This is an issue of contract. 

OTHER IMPACTS AND ISSUES:  
1.	This bill proposes a straightforward  tax deduction for a “merit good”. However, the Gross Receipts and Compensating Tax Act taxes many otherwise meritorious goods and services, and exempts other meritorious goods and services. The Gross Receipts and Compensating Tax Act treats some medical services as meritorious, and certainly provides extensive tax relief for most charitable organizations. Making the decisions about which goods and services are sufficiently meritorious to warrant a tax break is like debating the number of angels on the head of a pin. The state has traditionally had a very broad transaction tax base with a fairly low tax rate. Narrowing the base probably implies an increase in rate at some point in the future in order to maintain revenue. Thus, the benefit of narrowing the tax base is, at base, short lived, and may lead to more problems in the future.

2.	In general, the cost of an education at one of the state’s colleges or universities is far less than the lifetime benefit accruing to that education. The state general fund already pays for a substantial portion of the real costs of university education in the state.

3.	The fiscal impact of this proposal was determined by surveying college and non-college bookstores. On average, full-time university students expend $396 per year on textbooks, while students in the two-year colleges spend an average of $255 per year. As previously mentioned, all colleges and universities except UNM close their bookstores during fall and spring “book weeks”. Sales of textbooks, as well as other tangible property, outside this time period are taxable. This GGRT deduction is unlimited as to time, but does not create a deduction for the sale of other stuff, besides textbooks.