The Senate Committee on Taxation was called to order by Vice Chairman Dean A. Rhoads, at 2:10 p.m., on Thursday, February 25, 1999, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Mike McGinness, Chairman

Senator Dean A. Rhoads, Vice Chairman

Senator Randolph J. Townsend

Senator Ann O’Connell

Senator Joseph M. Neal, Jr.

Senator Bob Coffin

Senator Michael Schneider

GUEST LEGISLATORS PRESENT:

Senator Jon C. Porter, Sr., Clark County Senatorial District No. 1

Senator Maurice E. Washington, Washoe County Senatorial District No. 2

STAFF MEMBERS PRESENT:

Alice Nevin, Committee Secretary

OTHERS PRESENT:

Gary Murray, Owner, Take ‘n Bake Pizza

Amy Halley Hill, Lobbyist, Retail Association of Nevada

Dino DiCianno, Deputy Executive Director, Department of Taxation

Vice Chairman Dean A. Rhoads opened the meeting by introducing Bill Draft Request (BDR) 32-940.

SENATOR COFFIN MOVED TO INTRODUCE BDR 32-940.

SENATOR O’CONNELL SECONDED THE MOTION.

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Vice Chairman Rhoads opened the hearing on Senate Bill (S.B.) 221.

Senator Jon C. Porter, Sr., Clark County Senatorial District No. 1, testified a constituent had requested this bill. He read a letter into the record from Clayton T. Glenn (Exhibit C). Senator Porter noted Mr. Glenn felt that sales tax should not be paid on funeral expenses and the letter reflected his opinion.

Senator O’Connell said several constituents have brought this issue to her attention because while a person can prepay for a funeral, the tax is levied after the death.

Vice Chairman Rhoads pointed out there is a Fiscal Note of $442,288 for 6 months on this bill. Senator Neal noted the Fiscal Note shows the tax funds go to support city and county relief and local schools. He suggested voters should be made aware that if this bill passes, there would be a loss of revenue for local schools and county relief programs. Senator Porter said he was sure Mr. Glenn was not considering the issue of how the tax is applied. Vice Chairman Rhoads said a fiscal note is routinely included on the ballot and voters would see this information. Senator Neal said the Legislature cannot exempt everything. Senator Coffin pointed out there are many other exemptions and he would not be able to support this bill predicated upon the fact that the tax system is being ruined by too many exemptions.

David Pursell, Executive Director, Department of Taxation, testified the department prepared the Fiscal Note for this bill and he would be glad to answer questions. Senator Neal asked how the fiscal information was gathered. Mr. Pursell said businesses fill out an application to register with the state and the application information is coded and put into a database. In this case, the funeral service business sales and use tax, in the database, was queried to arrive at fiscal information for Fiscal Year 1998 and numbers were projected, based on the Economic Forum forecast, for coming years.

Marvin A. Leavitt, Lobbyist, City of Las Vegas, said the city is opposed to this bill because it enlarges the exemption pool. He pointed out Nevada’s tax base is relatively narrow and something new is added every session. He noted his opposition had nothing to do with the legitimacy of the exemption but exemptions reduce the revenue available to local government.

David L. Howard, Lobbyist, Greater Reno Sparks Chamber of Commerce, and Nevada State Chamber of Commerce, testified he agreed with Mr. Leavitt. He noted sales tax exemptions are opposed by the organizations he represents because they affect the total tax base of the state. Mr. Howard said, for the record, he was in support of Senator Coffin’s comments and opposed to any exemptions on sales tax.

Vice Chairman Rhoads closed the hearing on S.B. 221 and opened the hearing on S.B. 238.

Kevin Welsh, Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, said when food for home consumption was exempted from sales tax, the Department of Taxation established the intent of the law as to how this was applied. He noted the law needs further clarification now because of changes in supermarkets and stores.

Senator Maurice E. Washington, Washoe County Senatorial District No. 2, said this bill codifies some gaps in the current regulations. He summarized the Department of Taxation will determine whether the food is intended for immediate consumption and when exemptions will apply.

Senator Washington introduced Gary Murray, Owner, Take ‘n Bake Pizza, Sparks, Nevada. Mr. Murray said he lost business because supermarkets did not charge tax on frozen pizzas and he had to charge tax even though his product was cold and taken home for consumption, as was the grocery store product. He said his establishment does not have seating and people pick up the pizzas and finish baking them at home. In contrast, a pizza parlor prepares food for immediate consumption.

Senator Washington said Mr. Murray has since received an exemption from the Department of Taxation but it was decided to ask for a change in the law to clarify this issue. Chairman McGinness asked Mr. Murray to provide the committee with a copy of the letter he received from the Department of Taxation.

Amy Halley Hill, Lobbyist, Retail Association of Nevada, testified the association supports this legislation. She stated this change was needed because of the advent of delicatessens in grocery stores. This is a clarification of the intent of the law.

David Pursell, Executive Director, Department of Taxation, said the original intent of the law was to exempt food for home consumption but to tax restaurant food. He noted from its inception, this bill had been difficult to administer. Chairman McGinness asked Mr. Pursell if passage of this bill would help clarify this issue. Mr. Pursell said the take-and-bake issue had been resolved but, in his opinion, additional legislation would be needed to clarify the intent of taxing food.

Senator O’Connell asked Mr. Pursell to provide a copy of the regulation so that the language in the law could be mirrored with the regulation to make it more uniform.

Chairman McGinness closed the hearing on S.B. 238 and opened the work session on S.B. 36.

Mr. Welsh presented "Proposed Amendments to S.B. 36" (Exhibit D), which was written by the Department of Taxation.

Dino DiCianno, Deputy Executive Director, Department of Taxation, testified the department is suggesting four minor revisions to S.B. 36. Mr. DiCianno proposed the following: change the original proposed refund deadline dates to one specific date for all claimants; change the preliminary filing deadline dates; change the effective date in order to give the county assessor offices and the department sufficient time to inform claimants and implement the law change; and change the effective date of the act, upon passage and approval, to January 1, 2000.

RESPECTFULLY SUBMITTED:

Alice Nevin,

Committee Secretary

APPROVED BY:

Senator Mike McGinness, Chairman

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