FISCAL NOTE

Date Requested: February 24, 2016
Time Requested: 10:43 AM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
1829 Introduced HB4679
CBD Subject: Taxation


FUND(S):

General Revenue Fund

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 consumer sales and use taxes by one cent (from six percent to seven percent), with certain exceptions. The tax increase authorized by this bill sunsets July 1, 2019.
    
    Based on our interpretation, the proposed bill would result in an increase of approximately $215.0 million in Consumers Sales and Service Tax and Use Tax revenues for the first full year of implementation, expected to be FY2017. These additional collections would benefit the General Revenue Fund. As written, the 1 percent increase would terminate on June 30, 2020. It should be noted that the revenue estimate does not include relevant increases to the tax of the County and Municipality Economic Opportunity Development Districts. Absent an internal effective date, the provisions of this bill would take effect 90 days from passage. Under the assumption that the bill would become effective as late as March 12, 2016, the tax increase would be effective June 20, 2016. Timing of the effective date, based on this assumption, would impose a significant burden on retail vendors in the State as well as the State Tax Department, and could cause issues in administrative compliance.
    
    Additional administrative costs incurred by the State Tax Department are expected to be $12,500 for the remainder of FY2016. No additional costs are expected for subsequent years.
    
    



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 12,500 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 12,500 0 0
2. Estimated Total Revenues 0 215,000,000 215,000,000


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


    Based on our interpretation, the proposed bill would result in an increase of approximately $215.0 million in Consumers Sales and Service Tax and Use Tax revenues for the first full year of implementation, expected to be FY2017. These additional collections would benefit the General Revenue Fund. As written, the 1 percent increase would terminate on June 30, 2020. It should be noted that the revenue estimate does not include relevant increases to the tax of the County and Municipality Economic Opportunity Development Districts. Absent an internal effective date, the provisions of this bill would take effect 90 days from passage. Under the assumption that the bill would become effective as late as March 12, 2016, the tax increase would be effective June 20, 2016. Timing of the effective date, based on this assumption, would impose a significant burden on retail vendors in the State as well as the State Tax Department, and could cause issues in administrative compliance.
    
    Additional administrative costs incurred by the State Tax Department are expected to be $12,500 for the remainder of FY2016. No additional costs are expected for subsequent years.
    
    



Memorandum


    The stated purpose of this bill is to increase the consumer sales and use taxes by one cent (from six percent to seven percent), with certain exceptions. The tax increase authorized by this bill sunsets July 1, 2019.
    
    The proposed bill removes part of Subsection (c), which sets forth the tax on fractional parts of a dollar and sales in excess of a dollar. As written, the bill removes only the fractional part of a dollar while leaving sales in excess of a dollar intact, and renumbers the subsections such that Subsection (d) becomes Subsection (c) in the proposed bill and, effectively, moves the portion concerning sales on transactions more than a dollar to Subsection (b). It is likely this is a drafting oversight, but as written could introduce confusion.
    
    The proposed bill also strike the language “after December 31, 2003” from West Virginia Code §11-15-3(e) (currently §11-15-3(f)). That language made it clear that the tax levied on sales on mobile homes to be used by the owner as his principal year-round residence and dwelling is equal to 6 percent of 50 percent of the sale price became effective after that date. Removal of this language could cause possible confusion. There is also a title defect in that the title only addresses the increase of sales and use tax by one percent. It does not address that the increase sunsets or that language in the bill is deleted.
    
    
    



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