TITLE: CONCERNING AN EXPANSION OF THE STATE USE TAX EXEMPTION TO INCLUDE DONATIONS OF INVENTORIED GOODS BY THE OWNER OF SUCH GOODS, AND, IN CONNECTION THEREWITH, EXPANDING THE EXEMPTION FROM THE STATE SALES TAX TO INCLUDE SALES AND PURCHASES OF INVENTORIED GOODS THAT ARE SUBSEQUENTLY DONATED.

Fiscal Impact Summary	FY 1999/2000	FY 2000/2001
State Revenues - Refund of Excess TABOR revenues General Fund	General Fund Revenue Reduction
State Expenditures General Fund
FTE Position Change	0.0 FTE	0.0 FTE
Other State Impact: None
Effective Date: July 1, 1999
Appropriation Summary for FY 1999-2000: None
Local Government Impact: The bill reduces the revenues of the state and statutory cities, counties, and certain special districts where the local sales tax is collected by the state.

This bill as amended in the House Finance Committee, creates a state use tax exemption for donations of inventoried goods by the owner of the goods. The bill also exempts purchases of tangible personal property by a person that inventories goods that are subsequently donated from the imposition of state sales tax. The bill reduces the revenues of the state and statutory cities, counties, and certain special districts where the local sales tax is collected by the state. Therefore, the bill is assessed as having state and local fiscal impact. The bill does not create an impact on state or local expenditures.

The bill is effective for fiscal years commencing on or after July 1, 1999, however the bill would only apply if, state revenues for the immediately preceding state fiscal year exceeded the limitation on state fiscal year spending imposed by Section 20 (7)(a) of Article X of the State Constitution (the TABOR Amendment).

This bill creates a state use tax exemption for donations of inventoried goods by the owner of the goods and exempts purchases of tangible personal property by a person that inventories goods that are subsequently donated from the imposition of state sales tax. The amount of state sales and use tax revenues currently collected on donated inventoried goods that would be exempted by the bill is unknown. While the sales and use tax exemption proposed by the bill will reduce state General Fund revenues, the impact is anticipated to be minimal.

Under current law, SB97-1 requires the transfer of 10 percent of sales tax revenues to the Highway User Tax Fund (HUTF) for use on highway projects. This bill contains a provision designed to hold the amount of sales tax revenued diverted to the HUTF harmless (see the Omissions and Technical or Mechanical Defects section of the fiscal note). The bill is only effective for years in which the amount of state revenues for the immediately preceding state fiscal year exceeded the limitation on state fiscal year spending imposed by Section 20(7)(a) of Article X of the State Constitution (the TABOR amendment). Since the bill is a TABOR excess revenue refund mechanism, the bill will not impact the General Fund overview.

Except for specific exceptions, sales and use tax exemptions authorized at the state level also apply to statutory cities, counties, and special districts since their sales and use tax is collected by the state. Home rule cities collect their own sales and use tax, and may determine their own tax base. Because of various local sales tax rates and the lack of information regarding the geographic distribution of the companies that may be affected by the bill, no estimate has been made regarding the potential amount of sales and use tax revenue losses to local governments.

The fiscal note implies that no new spending authority or appropriations are required to implement the provisions of the bill.

Section 39-26-123 of the amended bill provides for an increase in the SB 97-1 diversion to the Highway Users Tax Fund and a corresponding decrease to the state General Fund. Since the bill refunds excess TABOR revenues, the SB 97-1 diversion will be based on a level of sales tax revenues that includes the sales tax that otherwise would have been collected on sales that are exempted by the bill. Therefore, this section is not necessary.