S2394
LEGISLATIVE FISCAL ESTIMATE
SENATE, No. 2394
STATE OF NEW JERSEY
214th LEGISLATURE
DATED: DECEMBER 2, 2010
SUMMARY
Synopsis: |
Dedicates revenues derived from certain sales and uses subject to sales and use tax to provide enhanced incentives for breeding and development of certain racehorses in this State. |
Type of Impact: |
Annual Increase in Costs to State General Fund. |
Agencies Affected: |
Department of Law and Public Safety; Department of the Treasury. |
Fiscal Impact |
Fiscal Year 2012 |
Fiscal Year 2013 |
Fiscal Year 2014 |
State Cost |
Indeterminate Increase – See comments below |
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The Office of Legislative Services (OLS) expects the bill will result in an indeterminate annual increase in costs to the State General Fund.
However, the OLS is unaware of data concerning the value of taxable sales and uses of horses, ponies, mules, donkeys, and hinnies or the value of taxable sales and uses of equine-related goods and services in New Jersey, and is, therefore, unable to quantify the revenues that will be annually diverted from the State General Fund to the New Jersey Standardbred and Thoroughbred Racehorse Incentive Fund and ultimately expended for purposes of providing incentives for the breeding and development of certain racehorses in this State.
The OLS also notes that the total State costs incurred as a result of the bill is dependent on how certain provisions will be interpreted and implemented. In particular, the bill permits the Director of the Division of Taxation in the Department of the Treasury, in consultation with the Executive Director of the New Jersey Racing Commission, to determine what property and services are made or rendered in connection with the breeding, training, boarding, showing, or racing of a horse, pony, mule, donkey, or hinny, and permits the director to estimate the actual amount of taxes collected in a prior fiscal year by utilizing any indices available to the director at the time the estimate is made.
Presumably, how those individuals interpret what property and services are determined to be made or rendered and what indices are available to the director will impact the amount of
revenues required to be deposited into the special dedicated fund.
BILL DESCRIPTION
Senate Bill No. 2394 of 2010 establishes a special dedicated fund, the “New Jersey Standardbred and Thoroughbred Racehorse Incentive Fund,” within the Department of Law and Public Safety to provide enhanced incentives for the breeding and development of certain racehorses in this State, and requires the director to annually deposit into the fund an amount equal to the sales tax and use tax revenue collected in the prior fiscal year from certain retail sales and uses.
Specifically, the bill requires the Director of the Division of Taxation to annually deposit into the fund an amount equal to the sales tax and the use tax revenue collected by the director in the prior fiscal year from the retail sale or use of: (1) any horse, pony, mule, donkey, or hinny; and (2) any tangible personal property or service made or rendered in connection with the breeding, raising, training, boarding, showing, or racing of a horse, pony, mule, donkey, which is subject to the sales and use tax.
The bill specifies that the director, in consultation with the Executive Director of the New Jersey Racing Commission, is required to determine and specify the tangible personal property and services that are deemed to be made or rendered directly and exclusively in connection with the breeding, raising, training, boarding, showing, or racing of a horse, pony, mule, donkey, or hinny, and that the director may, for purposes of determining the amount required to be deposited, estimate the actual amount of sales tax and use tax revenue collected in a prior fiscal year by utilizing any internal or external indices available to the director at the time the estimate is made.
The bill takes effect immediately and applies to sales and uses on or after July 1, 2011.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS expects the bill will result in an indeterminate annual increase in costs to the State General Fund. This increase of State costs reflects the amount of State tax revenues that would otherwise have been made available for deposit into the State General Fund but are diverted as a result of the bill into the New Jersey Standardbred and Thoroughbred Racehorse Incentive Fund to be awarded for purposes of providing enhanced incentives for the breeding and development of certain racehorses in this State.
However, the OLS is unaware of data concerning the value of taxable sales and uses of horses, ponies, mules, donkeys, and hinnies or the value of taxable sales and uses of equine-related goods and services in New Jersey, and is, therefore, unable to quantify the amount of revenues that will be annually diverted from the State General Fund to the special dedicated fund as a result of the bill.
In part, information obtained from published sources of data related to the equine industry in this State does not appear to take into consideration the specific exemptions and exclusions from tax that apply. The receipts from the sale of a bag of feed, the rental of a stall in a livery stable, and the charges rendered by a farrier in connection with the shoeing of a horse may, for instance, be exempt, excluded, or not subject to tax depending on who is making the purchase or how that property or service is used by the purchaser.
Additionally, the data that may be derived from past or present sales and use tax returns may not yield the detail necessary for an estimate. Current tax returns require the submission of information regarding the seller, the total taxable receipts, and the method of payment, but do not require an explanation as to how or from what property or services taxable receipts are derived.
The OLS also notes that the total State costs incurred as a result of the bill is dependent on how certain provisions are interpreted and implemented following enactment. That is, the total revenues that may be diverted from the State General Fund in any given fiscal year is dependent on how the Director of the Division of Taxation interprets and implements provisions of the bill related to the amount the director is required to deposit into the special dedicated fund in the future.
In particular, the bill provides that the director, in consultation with the Executive Director of the New Jersey Racing Commission, is required to determine and specify what property and services are made or rendered in connection with the breeding, training, boarding, showing, or racing of a horse, pony, mule, donkey, or hinny. Presumably, how those individuals interpret what property and services are made or rendered in connection with the breeding, training, boarding, showing, or racing of a horse, pony, mule, donkey, or hinny will impact the amount of revenues required to be deposited into the fund.
Additionally, the bill provides that the director may, for purposes of determining the amount required to be deposited, estimate the actual amount of tax revenues collected in a prior fiscal year from the retail sale or use of horses, ponies, mules, donkeys, and hinnies or from sales and uses of equine-related goods and services. Under the bill, the director may utilize any internal or external indices available at the time the estimate is required to be made.
Section: |
Revenue, Finance, and Appropriations |
Analyst: |
Associate Research Analyst |
Approved: |
David J. Rosen Legislative Budget and Finance Officer |
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).
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