FISCAL NOTE

Date Requested: March 20, 2017
Time Requested: 12:40 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
3317 Introduced SB678
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 replace the excise tax on e-liquids with a consumer sales tax on e-liquids in a fiscally neutral manner.
    
    The proposed bill would repeal the current excise tax of $0.075 per milliliter on e-liquids and increase the consumer sales and service tax on e-liquids from 6% to 11%. There is no effective date given, so it is assumed that if the bill passes it would become effective July 1, 2017.
    
    Per our interpretation, the passage of this bill would generate a loss of General Revenue Funds of roughly $0.9 million in FY2018, and for each year thereafter. This estimate is based on anticipated revenue from e-liquids only. E-liquids can be packaged individually (e.g., in cartridges or bottles for refill) or contained as part of the delivery device as is the case for disposable units. If the added value of these hardware components is captured with the sale of the e-liquid, tax receipts could be higher than anticipated and, thus, reduce estimated revenue losses.
    
    Additional administrative costs incurred by the State Tax Department are expected to be $19,000 in FY2018.
    
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 19,000 0
Personal Services 0 1,000 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 18,000 0
2. Estimated Total Revenues 0 -900,000 -900,000


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


    The proposed bill would repeal the current excise tax of $0.075 per milliliter on e-liquids and increase the consumer sales and service tax on e-liquids from 6% to 11%. There is no effective date given, so it is assumed that if the bill passes it would become effective July 1, 2017.
    
    Per our interpretation, the passage of this bill would generate a loss of General Revenue Funds of roughly $0.9 million in FY2018, and for each year thereafter. This estimate is based on anticipated revenue from e-liquids only. E-liquids can be packaged individually (e.g., in cartridges or bottles for refill) or contained as part of the delivery device as is the case for disposable units. If the added value of these hardware components is captured with the sale of the e-liquid, tax receipts could be higher than anticipated and, thus, reduce estimated revenue losses.
    
    
    Additional administrative costs incurred by the State Tax Department are expected to be $19,000 in FY2018.
    



Memorandum


    The stated purpose of this bill is to replace the excise tax on e-liquids with a consumer sales tax on e-liquids in a fiscally neutral manner.
    
    The bill purports to levy a sales tax of $0.11 per dollar of e-cigarette liquid. However, the bill states that the tax is being “imposed” rather than “levied”.
    
    The proposed Consumer Sales & Service Tax rate of 11% conflicts with the Streamlined Sales and Use Tax Agreement which limits the number of state sales tax rates.
    
    The definitions of “e-cigarette” and “e-cigarette liquid” have been changed to include “nicotine” though there is no requirement that nicotine be present. To keep a broad base for the tax on e-cigarette liquids, it is important not to open the argument that it is the nicotine which is being taxed.
    



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