FISCAL NOTE
Date Requested: January 20, 2023
Time Requested: 01:42 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2226 |
Introduced |
HB2868 |
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| CBD Subject: |
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FUND(S):
Local Government Funds, Tax Administration Services Fund
Sources of Revenue:
Other Fund local government funds, Tax Administration Services Fund
Legislation creates:
Decreases Existing Revenue, 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 remove the authority of municipalities participating in the Municipal Home Rule Program to impose a municipal sales tax.
According to our interpretation, the bill would amend W.Va. Code §8-1-5a(i)(14) by removing the language that allows a municipality in the Municipal Home Rule Program to enact a sales tax of up to one percent if it reduces or eliminates its municipal business and occupation tax. The bill has no internal effective date.
The bill is silent regarding municipalities which have already enacted a municipal sales and use tax under the Municipal Home Rule Program. However, Section §8-1-5a(b) states in part: “Any ordinance, act, resolution, rule, or regulation enacted by a participating municipality under the provisions of this section during the period of the Municipal Home Rule Pilot Program shall continue in full force and effect unless and until repealed: Provided, That municipalities that are participants in the Municipal Home Rule Program shall update their ordinances, acts, resolutions, rules, and regulations to comply with any additions or modifications to subsection (i) subsection (j) or subsection (k) of this section.” Since the amendment is being made to subsection (i), municipalities with a Municipal Home Rule Program authorized sales and use tax may no longer be permitted to collect the tax if the bill passes.
Currently, fifty-two municipalities are collecting municipal sales and use tax under the Municipal Home Rule Program. An additional four municipalities have submitted applications to the Municipal Home Rule Program. Based on our interpretation, if this bill is passed and the municipalities which are currently approved to collect sales and use tax under the Municipal Home Rule Program are no longer authorized to collect the tax, there will be a loss in local governments collections of up to $100 million in FY2024 and more than $137 million in subsequent fiscal years. The loss may be reduced if the affected municipalities can increase or reinstitute a local business and occupation tax. In addition, there would be a reduction in fees allocated to the Tax Administration Services Fund of roughly $1.0 million in FY2024 and $1.4 million in subsequent years. The provisions of this bill would not affect the imposition of local sales tax in the twenty-eight current municipalities who are not participating under the Municipal Home Rule Program. Local sales tax collections in these municipalities total roughly $6.1 million per year.
Additional costs to the State Tax Department will be $5,000 in FY2023.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2023
Increase/Decrease
(use"-") |
2024
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
5,000 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
5,000 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
-100,200,000 |
-136,800,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, the bill would amend W.Va. Code §8-1-5a(i)(14) by removing the language that allows a municipality in the Municipal Home Rule Program to enact a sales tax of up to one percent if it reduces or eliminates its municipal business and occupation tax. The bill has no internal effective date.
The bill is silent regarding municipalities which have already enacted a municipal sales and use tax under the Municipal Home Rule Program. However, Section §8-1-5a(b) states in part: “Any ordinance, act, resolution, rule, or regulation enacted by a participating municipality under the provisions of this section during the period of the Municipal Home Rule Pilot Program shall continue in full force and effect unless and until repealed: Provided, That municipalities that are participants in the Municipal Home Rule Program shall update their ordinances, acts, resolutions, rules, and regulations to comply with any additions or modifications to subsection (i) subsection (j) or subsection (k) of this section.” Since the amendment is being made to subsection (i), municipalities with a Municipal Home Rule Program authorized sales and use tax may no longer be permitted to collect the tax if the bill passes.
Currently, fifty-two municipalities are collecting municipal sales and use tax under the Municipal Home Rule Program. An additional four municipalities have submitted applications to the Municipal Home Rule Program. Based on our interpretation, if this bill is passed and the municipalities which are currently approved to collect sales and use tax under the Municipal Home Rule Program are no longer authorized to collect the tax, there will be a loss in local governments collections of up to $100 million in FY2024 and more than $137 million in subsequent fiscal years. The loss may be reduced if the affected municipalities can increase or reinstitute a local business and occupation tax. In addition, there would be a reduction in fees allocated to the Tax Administration Services Fund of roughly $1.0 million in FY2024 and $1.4 million in subsequent years. The provisions of this bill would not affect the imposition of local sales tax in the twenty-eight current municipalities who are not participating under the Municipal Home Rule Program. Local sales tax collections in these municipalities total roughly $6.1 million per year.
Additional costs to the State Tax Department will be $5,000 in FY2023.
Memorandum
The stated purpose of this bill is to remove the authority of municipalities participating in the Municipal Home Rule Program to impose a municipal sales tax.
The bill is insufficient to meet its purpose.
The bill amends §8-1-5a(i)(14) by striking the proviso language that expressly allow municipalities to enact a sales tax of up to 1% if they reduce or eliminate their B&O tax. The result is that section 8-1-5a(i)(14) merely says that municipalities cannot enact any law that is contrary to law governing taxation. If this bill is passed as written, it is not clear whether municipalities that have enacted sales and use taxes can continue imposing those taxes; or, if not, whether they can re-enact their B&O taxes to reclaim lost revenue.
A bill of this magnitude needs to include other sections that would be affected. For example, subsection (o) of the amended section addresses the Tax Department’s administration of the municipal sales tax; but subsection (o) is not amended. Other sections that may possibly need to be amended include those cited in the stricken language, such as parts of Articles 15, 15A, and 15B, and the Streamlined Sales and Use Tax Agreement.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov