MINUTES OF THE SENATE COMMITTEE ON TAXATION Sixty-eighth Session June 21, 1995 The Senate Committee on Taxation was called to order by Chairman Sue Lowden, at 4:45 p.m., on Wednesday, June 21, 1995, in Room 224 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Sue Lowden, Chairman Senator Kathy M. Augustine, Vice Chairman Senator Ann O'Connell Senator Dean A. Rhoads Senator Randolph J. Townsend Senator John B. (Jack) Regan Senator Ernest E. Adler STAFF MEMBERS PRESENT: Kevin Welsh, Deputy Fiscal Analyst, Fiscal Analysis Division Kathy Cole, Committee Secretary OTHERS PRESENT: Daryl Capurro, Lobbyist, Nevada Motor Transport Association (NMTA) Thomas Stephens, Director, Nevada Department of Transportation (NDOT) Chuck Bosch, Chief, Operations Analysis Division, Nevada Department of Transportation (NDOT) Raymond Sparks, Acting Deputy Director, Department of Motor Vehicles and Public Safety (DMV&PS) Donna Wadey-Howell, Acting Chief, Registration Division, Department of Motor Vehicles and Public Safety (DMV&PS) George Ross, Lobbyist, ARCO/Atlantic Richfield (ARW) Peter Krueger, Lobbyist, Nevada Petroleum Marketers Association Clair Haycock, Owner, Haycock Distributing Company Senator Lowden opened the hearing on Assembly Bill (A.B.) 415. ASSEMBLY BILL 415: Revises provisions relating to imposition and collection of tax on special fuel. (BDR 32-368) Daryl Capurro, Lobbyist, Nevada Motor Transport Association (NMTA), explained that this bill came from the interim committee on highway finance from the Sixty-seventh Session. Mr. Capurro explained the reason for the collection of diesel fuel tax being changed to the terminal rack level. A memorandum from the Fiscal Analysis Division, Legislative Counsel Bureau (LCB) was provided for the committee members (Exhibit C). Senator Lowden questioned the need for a fiscal note based on the interim study indication of a $4 million gain in the General Fund. Mr. Capurro responded that based on the information provided from the Department of Motor Vehicles and Public Safety (DMV&PS), in terms of what their estimate of the increase of tax was, it was $4 million. Senator Lowden asked where the money is coming from? Senator Rhoads asked how dyed fuel will be handled? Mr. Capurro said the dyed fuel is untaxed. A refund can be applied for through the DMV&PS for any clear diesel if a person uses at least 200 gallons in a 6-month period. He said the dyed fuel is dyed at the rack. Thomas Stephens, Director, Nevada Department of Transportation (NDOT), testified in support of any source of increased revenue to the Highway Fund that does not increase taxes. He provided a report called "Up and Down the Chain: Moving the Point of Taxation on Diesel Fuel" (Exhibit D). He said this bill will produce an additional $4 million for the Highway Fund. Chuck Bosch, Chief, Operations Analysis Division, Nevada Department of Transportation (NDOT), was present in support of Mr. Stephen's testimony. Raymond Sparks, Acting Deputy Director, Department of Motor Vehicles and Public Safety (DMV&PS), said the Registration Division of DMV&PS collects and administers the special fuel tax in Nevada. Moving the tax to the terminal rack will eliminate the tax elevation. Senator Rhoads asked how many states currently collect the tax at the terminal rack? Donna Wadey-Howell, Acting Chief, Registration Division, Department of Motor Vehicles and Public Safety (DMV&PS) provided the committee with a handout, "Point of Taxation on Special Fuels Survey" (Exhibit E) showing the different states tax rates. George Ross, Lobbyist, ARCO/Atlantic Richfield (ARW), testified the terminal rack collection of the tax is successful in California. He said the collection fee should stay with the people collecting that fee. The 2 percent collection fee closely matches the compensation for the work involved in this collection. Peter Krueger, Lobbyist, Nevada Petroleum Marketers Association, testified in opposition to the bill. He said he does not believe the difference in the amount collected at the terminal rack will be $4 million. He said he thinks this collection will be better served if it is moved to the wholesale level. This will eliminate the collection allowance. He said anyone who is a special fuel exporter will also be licensed as a distributor. He asked that the bill be amended to move the collection to the wholesale level. He said he was part of the interim study and he has been proposing this all along. Clair Haycock, Owner, Haycock Distributing Company, testified in opposition to the bill. He said he has been in the petroleum business for 40 years and knows the business. He said this bill will not eliminate cheating. Senator Rhoads asked if it will cost extra to pay the tax at the terminal rack? Mr. Haycock replied that it will cost 100 percent; it will save nothing. Senator Lowden asked whom the committee can go to as an independent source to get the real picture? Mr. Haycock suggested the collection point be at the wholesaler level. Mr. Krueger stated there is no one the committee can really go to because everyone has their own opinion. Senator Regan stated that the state of Montana has collected about $11 million more from their taxes. Mr. Krueger stated that Montana went to the wholesale level of collection. Senator Augustine said she had understood there was an agreement reached between Mr. Krueger and the interim study committee. Mr. Krueger stated he does not recall any understanding. The 2 percent collection allowance is an appropriate amount. The collection people are bonded and there are very stiff fines for anyone who does not abide by the rules. The collection point should be moved from the retail level to the wholesale level and allow the collection point to keep the 2 percent. Senator Rhoads said there are cheaters everywhere. There will be an increase in tax collected at the terminal rack level because there will be an elimination of some of the cheating. Mr. Sparks noted that objective information can be obtained from the interim committee. Senator Lowden adjourned the meeting at 5:45 p.m. RESPECTFULLY SUBMITTED: ______________________________ Diane Rea, Committee Secretary APPROVED BY: _____________________________ Senator Sue Lowden, Chairman DATE: ______________________ Senate Committee on Taxation June 21, 1995 Page