FISCAL NOTE
Date Requested: February 23, 2021
Time Requested: 12:28 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2174 |
Introduced |
HB2649 |
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| CBD Subject: |
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FUND(S):
Medical School Fund
Sources of Revenue:
Special Fund
Legislation creates:
Increases Revenue From Existing Sources, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to change the structure of the tax on bottled soft drinks and soft drink syrups and powders to only cover soft drinks with added caloric sweeteners, increase the rate to two cents per ounce, and to rededicate the proceeds to all three medical schools in the state.
According to our interpretation, effective July 1, 2021, the proposed bill would modify the current Soft Drink Tax by updating the definition of “Bottled Soft Drinks” to only include nonalcoholic beverages which are intended for human consumption that contain any added caloric sweetener. Beverages sweetened solely with noncaloric sweeteners, unflavored fluid milk and natural fruit or vegetable juice would not be subject to the tax. The proposed bill increases the tax to two cents per fluid ounce for bottled soft drinks and soft drinks produced from syrups or powders.
On an annualized basis, the proposed tax is expected to yield roughly $159.7 million. Net of current Soft Drinks Tax collections, which average $14.0 million per year, the additional net yield would be roughly $145.7 million per year. The provisions of this bill would raise the current Soft Drinks Tax on a two-liter bottle of soda from 4 cents to $1.35. The magnitude of the tax change is expected to reduce in-state sales of sweetened beverages by up to 40 percent. The fiscal note does not attempt to quantify the impact of costs on bottlers, suppliers, retailers, and restaurants operating in this state.
In FY2022, and subsequent fiscal years, the proposed bill would dedicate the first $18 million of collections to the West Virginia School of Medicine with remaining revenues of $5 million to the Marshall University School of Medicine, $3 million for the West Virginia School of Osteopathic School and excess proceeds of up to $55 million shall be directed by supplemental appropriation for teachers pay raises. The remainder of any revenue collected shall be deposited in the General Revenue Fund of the State.
Additional administrative costs incurred by the State Tax Department would be $47,000 in FY2021, $154,500 in FY2022, and $150,000 in each fiscal year thereafter.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2021
Increase/Decrease
(use"-") |
2022
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
47,000 |
154,500 |
150,000 |
| Personal Services |
0 |
150,000 |
150,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
4,500 |
0 |
| Other |
47,000 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
145,700,000 |
145,700,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, effective July 1, 2021, the proposed bill would modify the current Soft Drink Tax by updating the definition of “Bottled Soft Drinks” to only include nonalcoholic beverages which are intended for human consumption that contain any added caloric sweetener. Beverages sweetened solely with noncaloric sweeteners, unflavored fluid milk and natural fruit or vegetable juice would not be subject to the tax. The proposed bill increases the tax to two cents per fluid ounce for bottled soft drinks and soft drinks produced from syrups or powders.
On an annualized basis, the proposed tax is expected to yield roughly $159.7 million. Net of current Soft Drinks Tax collections, which average $14.0 million per year, the additional net yield would be roughly $145.7 million per year. The provisions of this bill would raise the current Soft Drinks Tax on a two-liter bottle of soda from 4 cents to $1.35. The magnitude of the tax change is expected to reduce in-state sales of sweetened beverages by up to 40 percent. The fiscal note does not attempt to quantify the impact of costs on bottlers, suppliers, retailers, and restaurants operating in this state.
In FY2022, and subsequent fiscal years, the proposed bill would dedicate the first $18 million of collections to the West Virginia School of Medicine with remaining revenues of $5 million to the Marshall University School of Medicine, $3 million for the West Virginia School of Osteopathic School and excess proceeds of up to $55 million shall be directed by supplemental appropriation for teachers pay raises. The remainder of any revenue collected shall be deposited in the General Revenue Fund of the State.
Additional administrative costs incurred by the State Tax Department would be $47,000 in FY2021, $154,500 in FY2022, and $150,000 in each fiscal year thereafter.
Memorandum
The stated purpose of this bill is to change the structure of the tax on bottled soft drinks and soft drink syrups and powders to only cover soft drinks with added caloric sweeteners, increase the rate to two cents per ounce, and to rededicate the proceeds to all three medical schools in the state.
What is not included in “caloric sweetener” needs to be very clear. Sugar alcohols such as sorbitol, mannitol, xylitol and others have calorie contents of 0 to 3 calories per gram where the sugars listed in the bill have 4 calories per gram. Since sugar alcohols are not addressed, it is unclear whether those with caloric content need to be taxed. If those with caloric content are to be taxed, those sweeteners need to be listed. The bill does not address whether the addition of fruit juice for the purpose of adding sweetness is taxed.
The bill fails to strike through line 19 of W.Va. Code §11-19-2. This omission allows for two different tax rates for soft drink syrup.
The tax is effective July 1, 2021, but there is not internal effective date for the amended definitions. The bill deletes the amended portions and may be difficult to enforce the tax without the former definitions and tax rates.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov