MINUTES OF THE
SENATE Committee on Taxation
Seventy-First Session
May 3, 2001
The Senate Committee on Taxationwas called to order by Chairman Mike McGinness, at 2:00 p.m., on Thursday, May 3, 2001, 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
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
Assemblyman Joseph (Joe) E. Dini, Jr., Lyon, Storey, part of Carson City Counties Assembly District No. 38
Assemblyman John W. Marvel, Humboldt, Pershing, parts of Elko, Eureka and Lander Counties Assembly District No. 34
Assemblyman David E. Goldwater, Clark County Assembly District No. 10
Assemblywoman Christina R. Giunchigliani, Clark County Assembly District No. 9
STAFF MEMBERS PRESENT:
Kevin D. Welsh, Deputy Fiscal Analyst
Heather Miller, Committee Secretary
OTHERS PRESENT:
Don Renner, Concerned Citizen
Steven G. Kost, Concerned Citizen
Buddy Howard, Concerned Citizen
K. Hugh Montrose, Concerned Citizen
Gilbert M. Griffin, Concerned Citizen
Daniel G. Smith, Concerned Citizen
Doug Busselman, Lobbyist, Nevada Farm Bureau
David Pursell, Executive Director, Department of Taxation
C. Joseph Guild III, Lobbyist, Nevada Cattlemen’s Association
James C. Milstead, Concerned Citizen
Carole Vilardo, Lobbyist, Nevada Taxpayers Association
Kenneth Lange, Lobbyist, Nevada State Education Association
Kami L. Dempsey, Lobbyist, Director, Government Affairs, Las Vegas Chamber of Commerce
Elizabeth MacMenamin, Lobbyist, Retail Association of Nevada
James E. Keenan, Lobbyist, National Association of Purchasing Management, Northern Nevada, Incorporated, and Nevada Public Purchasing Study Commission, and Northern Nevada Consortium for Cooperative Purchasing
Raymond Bacon, Lobbyist, Nevada Manufacturers Association
P. Forrest Thorne, Deputy Executive Director, Department of Taxation
Douglas C. Thunder, Deputy Superintendent for Administrative and Fiscal Services, Department of Education
Alan H. Glover, Lobbyist, City of Carson City, and County Fiscal Officers’ Association
Pat Coward, Lobbyist, Nevada Association of Realtors
Penny Mayer, Nevada Association of Realtors
Chairman McGinness opened the hearing on Assembly Bill (A.B.) 243.
ASSEMBLY BILL 243: Proposes to exempt from sales and use tax sale of farm machinery and equipment, and provides such exemption from certain analogous taxes. (BDR 32-866)
Assemblyman Joseph (Joe) E. Dini, Jr., Lyon, Storey, part of Carson City Counties Assembly District No. 38, testified in support of A.B. 243, stating Nevada loses farm equipment buyers to neighboring states because they do not charge sales tax on their machinery. He said two-thirds of Nevada’s farm machinery is brought in from out of state, thus no sales tax is collected. He said Internet sales have also posed an obstacle to equipment dealers who cannot compete with the convenience and non-sales-taxed prices of online shopping.
Don Renner, Concerned Citizen, testified in support of A.B. 243, speaking as an equipment dealer himself. He explained while some customers are loyal to local farm equipment dealers, the lower prices in Idaho and Utah prove too advantageous to most buyers. He said the profit margin most dealers make in the Nevada area is roughly equal to the sales tax. He provided his written testimony (Exhibit C).
Senator Rhoads mentioned he bought his John Deere parts from Idaho as well. Senator Rhoads and Mr. Renner discussed collecting the sales tax on equipment.
Senator Neal asked how much money this exemption equaled. Mr. Renner answered the fiscal impact would equal a few hundred thousand dollars per year.
Steven G. Kost, Concerned Citizen, testified on behalf of the Far West Equipment Dealers’ Association about the taxation on farm machinery to farmers. He distributed a map (Exhibit D) to the committee to illustrate equipment taxation in the United States. He said he would support parity for the growers and producers in each state. He pointed out agricultural equipment dealers are large employers in rural areas, thus alleviating the sales tax would bring the customers and prosperity back to the smaller towns.
Senator Neal said he understood Mr. Kost’s request, however, exemptions of this kind keeps money from aiding other sources, including schools. He asked what he would suggest to keep this from happening. Assemblyman Dini replied the local county and city tax had been taken off, but the 2 percent in the General Fund in Nevada still goes to the school system. He added the economy would make up the sales tax in profits once customers return to local businesses.
Assemblyman John W. Marvel, Humboldt, Pershing, parts of Elko, Eureka and Lander Counties Assembly District No. 34, said living next to Oregon and Idaho, which are states with no equipment taxes, is very damaging to Nevada dealers. He explained a single machine costing $100,000 is a considerable boost in a local economy. He stated he was usually opposed to tax exemptions, but he believed this situation called for one.
Senator Neal reiterated his concern about the proposed tax exemption affecting the school funding. Assemblyman Marvel said he believed this exemption would have an insignificant impact compared to the good it will do for Nevada’s economy.
Buddy Howard, Concerned Citizen, identified himself as a farm equipment dealer from Winnemucca, and testified on his habitual sale losses to Oregon, which is 75 miles away from his dealership. He read his testimony from a prepared statement (Exhibit E). He said he had charted market shares for his business annually, and the data showed $1,300,008 in outside sales. He asked the committee to consider passing A.B. 243 for the sake of the dealers and their influence on the economy.
K. Hugh Montrose, Concerned Citizen, identified himself as a farm equipment dealer from Lovelock, and testified in support of A.B. 243. He said California is currently considering dropping its sales tax on farm equipment. He explained if that happens, Nevada would be surrounded by states exempting farm machinery from sales taxes. He noted Nevada does not tax customers for buying food, but it taxes the equipment needed to grow it.
Gilbert M. Griffin, Concerned Citizen, identified himself as a farm equipment dealer from Lund, and testified his business was the second largest employer of his town, which has a population of 350 people. He said Lund is situated near Idaho and Utah, giving equipment customers many other places to buy. He stated for every piece of equipment he sells at his dealership, approximately two machines are bought out of state and brought back to Lund.
He asked the committee for parity.
Daniel G. Smith, Concerned Citizen, identified himself as a farm equipment dealer with stores in Yerington and Wellington, and testified he also had trouble making sales because of the Nevada sales tax. He said he also believed the money made by sales, if the tax is lifted, would be reinvested into the economy.
Doug Busselman, Lobbyist, Nevada Farm Bureau, testified in support of Assembly Bill 243. He read his testimony from a prepared statement (Exhibit F). He said the University of Nevada, Reno, College of Agriculture, Biotechnology and Natural Resources, economic department, discovered the income multiplier is 2.21 percent, which means that every $1 increase in income generated by the agricultural sector in rural Nevada also generates $2.21 in total rural economic income. He provided a table of statistics (Exhibit G) to better illustrate his point.
David Pursell, Executive Director, Department of Taxation, testified the language of A.B. 243 defines what gross receipts are, which apply to all sales, rentals, and leases of defined farm equipment on the 5 percent local sales tax, until the 2 percent is voted on. Senator Neal asked if that permitted exemptions on all retail sales of equipment. Mr. Pursell affirmed it did. Senator Neal and Mr. Pursell discussed the exemptions on equipment and components.
Senator O’Connell asked Mr. Pursell how many other businesses in Nevada are in the same tax predicament. Mr. Pursell answered he knew of a few examples, like the off-road vehicles.
Senator Rhoads asked why there was $1000 limit written on page 2, line 22. Mr. Pursell answered any farm equipment over $1000 bought by a customer would be tax-exempt, while anything under $1000 would be subject to the Nevada sales tax. Senator Rhoads asked why it was not taken out. Mr. Busselman replied this was language that defined agricultural equipment and components. Senator Rhoads asked if he would object to removing the $1000 limit. A discussion between Senator Townsend, Mr. Smith, and Mr. Pursell followed Senator Rhoads’ question. The men agreed the $1000 was not really necessary.
C. Joseph Guild III, Lobbyist, Nevada Cattlemen’s Association, testified he had nothing to add to the points already made, except that Nevada Cattlemen’s Association supported the passage of A.B. 243.
James C. Milstead, Concerned Citizen, identified himself as a farm equipment dealer from Reno, and testified in support of A.B. 243 for the same reasons given by his colleagues. He noted although a customer might buy a machine out of state, they usually go to local dealers for repairs, which can sometimes cause disagreements between dealers and customers.
Chairman McGinness closed the hearing on A.B. 243 and opened the hearing A.B. 455.
ASSEMBLY BILL 455: Enacts Simplified Sales and Use Tax Administration Act. (BDR 32-494)
Assemblyman David E. Goldwater, Clark County Assembly District No. 10, testified that remote sales are the same over the Internet as they are through catalogues, however, the proliferation of remote sales over the Internet has brought about some significant attention since the state does not collect anything from these transactions. Assemblyman Goldwater began a Microsoft PowerPoint presentation (Exhibit H), which addressed e-commerce. He stated Nevada stands to lose a significant amount of revenue from the sales tax lost to e-commerce, which are not covered under Nevada taxation laws. He stated businesses like digital and electronic equipment dealers in Nevada want tax exemptions so they can compete with the tax-free Internet businesses. He explained one of the problems facing many states was the federal government writing state’s tax policies, such as income tax. He said states needed to maintain absolute jurisdiction over their sales taxes.
Senator O’Connell asked Assemblyman Goldwater if the governors of New Mexico and California had vetoed similar legislation in their states. Assemblyman Goldwater affirmed they had, but for reasons not pertaining to the bill.
Assemblyman Goldwater said some of the major simplification issues that exist are local rate simplification, matching rates to jurisdiction, frequency of changes, single registration for all vendors, and simplified filing. He also said an audit relief would be useful because it would limit auditors of retailers using a certified tax service provider or system and would provide a system check of company software. He said he endorsed A.B. 455 because it would allow Nevada to engage in a multi-state discussion and agreement of how to assess and collect sales tax, and try to make the process simpler for retailers who do business across state lines.
Senator Coffin asked Assemblyman Goldwater how casual sales, like those on e-Bay (an Internet auction site), are taxed. Assemblyman Goldwater answered it would be unmanageable to tax such a large e-commerce business like e-Bay. Carole Vilardo, Lobbyist, Nevada Taxpayers Association, testified in support of A.B. 455. She stated the proposed amendments are satisfactory.
Kenneth Lange, Lobbyist, Nevada State Education Association, testified in support of A.B. 455. He stated the bill was necessary to increase state revenue, and it would give parity to local businesses.
Kami L. Dempsey, Lobbyist, Director, Government Affairs, Las Vegas Chamber of Commerce, testified in support of A.B. 455.
Elizabeth MacMenamin, Lobbyist, Retail Association of Nevada, testified in support of A.B. 455.
James E. Keenan, Lobbyist, National Association of Purchasing Management, Northern Nevada, Incorporated, Nevada Public Purchasing Study Commission, and Northern Nevada Consortium for Cooperative Purchasing, testified in neutrality for A.B. 455, and stated he understood Nevada needed the additional revenue. He supplied a handout to the committee (Exhibit I) for its consideration. He suggested a small amendment concerning the purchasing function that he articulated in the handout.
Raymond Bacon, Lobbyist, Nevada Manufacturers Association, testified in support of A.B. 455.
Senator Neal asked if A.B. 455 would create any additional taxes. Mr. Bacon answered the bill would not create any taxes but would simply capture those taxes being lost through e-commerce.
P. Forrest Thorne, Deputy Executive Director, Department of Taxation, testified in support of A.B. 455, and stated the simplification process would take time.
Senator Coffin asked Mr. Thorne if e-commerce businesses use the Internet as an excuse to not collect any transactions from anyone. He asked if any of these businesses are hiding behind the moratoriums. Mr. Thorne replied he had not heard any such excuse or justification given by an e-commerce business.
Senator Neal asked Mr. Thorne if he would require funds to upgrade the computer software to better assess sales taxes, should the bill pass. Mr. Thorne affirmed the Department of Taxation would.
Chairman McGinness closed the hearing on A.B. 455 and opened the hearing on A.B. 501.
ASSEMBLY BILL 501: Makes various changes relating to taxes imposed for support of school districts. (BDR 34-1004)
Assemblywoman Christina R. Giunchigliani, Clark County Assembly District No. 9, testified in support of A.B. 501, and stated the bill would allow any school district in a county with a population of less than 40,000 to submit an advisory question to the voters asking if the commission should enact and currently authorize tax on residential construction at a specific amount not to exceed $1600. She said this legislation would be beneficial to rural counties which are not able to raise the same amount of funds as the urban areas.
Senator O’Connell asked Assemblywoman Giunchigliani if there was a maintenance fund in the school budget. Assemblywoman Giunchigliani responded that there is an emergency maintenance fund in case of a broken air conditioner, or something similar.
Douglas C. Thunder, Deputy Superintendent for Administrative and Fiscal Services, Department of Education, testified there is a line item that is reported for maintenance and repair in schools. He stated all districts have a building and sites fund, which receives revenue from the state and can pay for some of the major repairs needed. Senator O’Connell asked how the funds would be segregated so that they would not be included in negotiations, but would go to the maintenance funding. Assemblywoman Giunchigliani answered on page 3 there is a reference to where the tax would be transmitted to the treasurer, where it could not be utilized for negotiations. Senator O’Connell asked if they had a dollar amount for any particular county needs for repairs. Assemblywoman Giunchigliani answered 4 years ago Clark County had needed $73,652,837, which was just for high schools.
Senator Neal asked if Clark County had this proposal in place when it tried for the $600 million (approximately) bond issue in which it allowed that money to be used for maintenance. Assemblywoman Giunchigliani replied he (Senator Neal) was referring to the real estate transfer tax, which was segregated and had to go to a vote of the people. She said it was used for many things, including capital construction, remodeling, and rebuilding. She said A.B. 501 would not affect that fund.
Ms. Vilardo testified in opposition to the original A.B. 501 and the amended version. She stated rural areas that do not experience much population growth tend to have flat revenues and it puts the local governments looking everywhere for new revenue. She informed the committee she could not conceive of any amendments that would alleviate her concerns.
Alan H. Glover, Lobbyist, City of Carson City, and County Fiscal Officers’ Association, representing all 17 county recorders, also testified in opposition to A.B. 501. He explained if this tax is added it will be one more tax that the county recorders have to break out, which means the recorders must stop any undertakings already going on and enter these new taxes into the records on a daily basis. He said the recorders see this tax as a local tax, and as such, will not generate much revenue for the workload it will create.
Pat Coward, Lobbyist, Nevada Association of Realtors, testified in opposition to the original and amended versions of A.B. 501.
Penny Mayer, Nevada Association of Realtors, testified in opposition of Assembly Bill 501, and provided her written testimony (Exhibit J) to the committee. She stated she was concerned that Nevada’s rural populations are declining, requiring schools to depend on income from an unstable, waning source. She said transfer taxes are inappropriate funding methods for schools, and noted A.B. 501 would tax housing and make homes in declining regions more expensive.
Chairman McGinness adjourned the meeting at 4:30 p.m.
RESPECTFULLY SUBMITTED:
Heather Miller,
Committee Secretary
APPROVED BY:
Senator Mike McGinness, Chairman
DATE: