FISCAL NOTE

Date Requested: May 16, 2016
Time Requested: 05:21 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
4004 Introduced SB1005
CBD Subject: Taxation


FUND(S):

General Revenue

Sources of Revenue:

General Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


    The stated purpose of this bill is to increase the excise tax on cigarettes and tobacco products, to impose tax resulting from a rate change on inventories, to specify due dates for payment of tax resulting from a rate change on cigarette stamps, to levy a tax upon e-cigarette liquid, to provide for the administration and enforcement of the tax on e-cigarette liquid, all effective July 1, 2016.
    
    Based on our interpretation, the bill increases the tax on cigarettes from $.55 to $1.00, increases the rate of tax on tobacco products other than cigarettes from 7 percent of the wholesale price to 12 percent, and establishes a new tax of $.075 per milliliter of e-cigarette liquid. Revenue estimates for a full year are as follows:
    
    Product Full Year Revenue Estimate
    Cigarettes $ 71.5 million
    Other Tobacco Products $ 4.7 million
    E-Cigarette Fluid $ 1.8 million
    Total $ 78.0 million
    
    It is important to note that consumers may adjust their consumption patterns to avoid paying the higher tax rates (i.e., purchase of tobacco products could increase in June 2016). The potential increase in FY2016 Tobacco Products Tax collections is not quantified here. Longer-term consumption effects of the increased rates are considered in the estimates.
    
    Administrative costs to the Tax Department will be $43,000 in the current Fiscal Year, $40,500 in FY2017, and $35,000 in each year thereafter.
    
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2016
Increase/Decrease
(use"-")
2017
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 43,000 40,500 35,000
Personal Services 0 35,000 35,000
Current Expenses 3,000 0 0
Repairs and Alterations 0 0 0
Assets 0 5,500 0
Other 40,000 0 0
2. Estimated Total Revenues 0 78,000,000 78,000,000


Explanation of above estimates (including long-range effect):


    Based on our interpretation, the bill increases the tax on cigarettes from $.55 to $1.00, increases the rate of tax on tobacco products other than cigarettes from 7 percent of the wholesale price to 12 percent, and establishes a new tax of $.075 per milliliter of e-cigarette liquid. Revenue estimates for a full year are as follows:
    
    Product Full Year Revenue Estimate
    Cigarettes $ 71.5 million
    Other Tobacco Products $ 4.7 million
    E-Cigarette Fluid $ 1.8 million
    Total $ 78.0 million
    
    It is important to note that consumers may adjust their consumption patterns to avoid paying the higher tax rates (i.e., purchase of tobacco products could increase in June 2016). The potential increase in FY2016 Tobacco Products Tax collections is not quantified here. Longer-term consumption effects of the increased rates are considered in the estimates.
    
    Administrative costs to the Tax Department will be $43,000 in the current Fiscal Year, $40,500 in FY2017, and $35,000 in each year thereafter.
    



Memorandum


    



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov