BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  2

DATE:  February 19, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER: SB -714

SPONSOR: Senator Papen

BILL SHORT TITLE: Extend by two years the ten-year reissue period for Non-Taxable Transaction Certificates

DESCRIPTION: This bill gives the Department and taxpayers an additional two years  -- until January 1, 2004 instead of the currently scheduled January 1, 2002 -- before all non-taxable transaction certificates are rendered void and must be reissued. The scheduled reissue in 2012 is delayed until 2016 and so on, on a twelve-, rather than ten-year cycle.

EFFECTIVE DATE: July 1, 2001

FISCAL IMPACT: no revenue impact.

APPROPRIATION IMPACT: The Department’s budget submission for FY 2002 does not contain a request for a special appropriation to cover the costs of reissue. 

ADMINISTRATIVE IMPACT: Based on experience from 1991, the cost of voiding and reissuing an estimated 4,000,000 certificates will be about $500K in overtime, printing and contract systems work. This bill will delay the need for that special appropriation by two years. (However, see OTHER ISSUES AND IMPACTS for the effect of the bill on a planned simplification of the NTTC scheme.

OTHER IMPACTS AND ISSUES:
1.	In the fall of 1991, when the Department first undertook a comprehensive reissue of NTTCs, the Department cancelled and reissued over 2.5 million certificates. This reissue cost the Department over $350K in mailing, printing and contract systems programming. The cost to the business community was incalculable. One nameless taxpayer maintains over 30,000 NTTCs on file with suppliers. It may well be that the cost of reissuing certificates will cost business in excess of $1 million.
2.	The 1991 reissue plan was also crafted as a revenue raiser. The reissue bill enacted required taxpayers to pay a $100 fee for the privilege of issuing certificates. Before the $100 fee was cancelled effective July 1, 1994, taxpayers had paid over $4.3 million in fees.
3.	In the ensuing ten years, there have been few complaints about inappropriate, or uncontrolled use of NTTCs. Perhaps instead of a delay, it might be appropriate to cancel the periodic cancellation altogether. If in the future, there becomes an evident need, the legislature can enact another one-shot cancellation and reissue program. This approach will save the Department and taxpayers time and money for accomplishing a reissue that does not serve any public or private purpose.
4.	The Department has pledged to simplify the entire NTTC scheme at the next reissue period. The Department expects to reduce the current scheme that has 15 or 16 different certificates to a simplified scheme with at most 6 main certificates. This bill will delay the implementation of the simplified scheme. 

Certificate Type	

Nature of Issuer and Transaction	
Statutory
 Reference	
Type 1	By a manufacturer for the purchase of tangible personal property which will become an ingredient or component part of the product being manufactured.	Section 7-9-45 NMSA 1978	
Type 2 	By a wholesaler or retailer for purchase of tangible personal property for resale in the ordinary course of business.	Section 7‑9‑47 NMSA 1978	
Type 3 	By a lessee for the lease of tangible personal property for subsequent lease in the ordinary course of business.	Section 7-9-50 NMSA 1978	
Type 4 	By a lessor for the purchase of tangible personal property for subsequent lease in the ordinary course of business.	Section 7-9-49 NMSA 1978	
Type 5 	By a service contractor for the purchase of a service for resale if (1) the value of the service purchased is stated separately in the charge upon subsequent sale of the service; (2) the subsequent sale by the buyer is in the ordinary course of business; and (3) the subsequent sale of the service is taxable under the Gross Receipts and Compensating Tax Act.	Section 7-9-48 NMSA 1978	
Type 6 	By a construction contractor for the purchase of construction materials which will be incorporated as an ingredient or component part of a construction project which is subject to the gross receipts tax.	Section 7-9-51 NMSA 1978	
Type 7 	By a construction contractor for the purchase of construction services to be performed on a construction project which is subject to the gross receipts tax.	Section 7-9-52 NMSA 1978	
Type 8 	For the purchase of service for export when initial use of the product of the service will be made outside New Mexico.	Section 7-9-57 NMSA 1978	
Type 9 	By government agencies and 501(c)(3) organizations for the purchase of tangible personal property only. These certificates may not be used for the purchase of services or for the lease of property. 501(c)(3) organizations may not use these certificates to purchase construction materials to be used in construction projects. 	7-9-54 NMSA 1978 and
7-9-60 NMSA 1978	
Type 13 	By manufacturers for the purchase of services performed directly upon tangible personal property they are in the business of manufacturing or upon ingredient or component parts thereof.	
Section 7-9-75 NMSA 1978	

Type 14 	
By state and federal credit unions for purchase of tangible personal property.	
Federal law preempts taxation of federal credit unions. State law enabling state credit unions include a provision that they be treated the same as federal credit unions for taxation.	

Type 15 	
By qualified federal contractors on a contract by contract basis.	

Type OSB 	
By an out-of-state purchaser of tangible personal property if the tangible personal property for resale in the ordinary course of business. This certificate differs from a type 2 certificate in that the purchaser need not be registered with the Department.	
Section 7‑9‑47 NMSA 1978	

Filmmakers	
By qualified filmmakers for the purchase or lease of tangible personal property or purchase of specified services integral to producing a film.	
Section 7-9-86 NMSA 1978	

Spaceport 	
The Department will develop a spaceport deduction certificate if required.			
Section
7-9-54.2 NMSA 1978