FISCAL NOTE

Date Requested: February 08, 2018
Time Requested: 01:46 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2065 Introduced HB4475
CBD Subject:


FUND(S):

Local governments

Sources of Revenue:

Other Fund local governments

Legislation creates:





Fiscal Note Summary


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


    The stated purpose of this bill is to allow local governments to levy a sales tax on food and beverages sold at restaurants. The bill provides for county and municipality options. The bill limits the total tax to three percent. The bill limits a municipal tax to two percent. The bill sets forth the procedures for counties and municipalities to use to impose the tax. The bill requires publication. The bill sets forth how the collected tax may be used. The bill sets forth apportionment of the tax between local jurisdictions. The bill sets forth exemptions from the tax. The bill defines terms. The bill provides criminal penalties.
    
    According to our interpretation, the proposed bill allows county and municipal governments to levy a sales tax on food and beverages purchased from restaurants within county or municipal borders. The bill caps the amount of additional tax that can be levied at 3 percent (counties) and 2 percent (municipalities). Because the bill states that the tax is levied on the gross amount charged, it is presumed the tax would be imposed prior to consideration of coupons and other discounts. Municipalities may seek to impose a municipal food and beverage tax only if the county in which the municipality is located has not levied or sought to levy such a tax within one year of the effective date of this bill.
    
    As written, the proposed bill does not affect State revenues as collections are directly remitted to the county or municipality where the funds originated. If all county governments are able to levy the maximum allowable tax, estimated aggregate revenues could be roughly $72 million per year, with the average county benefit being roughly $1.3 million per year. This analysis does not attempt to characterize potential revenue losses to border communities that may impose a lower tax on food and beverage purchases at restaurants.
    
    The amount of potential revenues will be highly variable, as there are caveats to the collection and use of the funds. For example, municipalities may only impose and collect the tax directly if the county has not sought to levy the tax. Municipalities are also limited to a tax of 2 percent, which would reduce earning potential in these areas. The bill also outlines provisions as to how revenues collected by counties may be spent. The bill requires at least 25 percent of revenues to be remitted to the county’s economic development authority for economic development purposes. Further, for revenues collected from restaurants within municipal borders, the bill requires at least 25 percent of revenues to be remitted to that municipality.
    
    There would be no additional costs incurred by the State Tax Department.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2018
Increase/Decrease
(use"-")
2019
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


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


    According to our interpretation, the proposed bill allows county and municipal governments to levy a sales tax on food and beverages purchased from restaurants within county or municipal borders. The bill caps the amount of additional tax that can be levied at 3 percent (counties) and 2 percent (municipalities). Because the bill states that the tax is levied on the gross amount charged, it is presumed the tax would be imposed prior to consideration of coupons and other discounts. Municipalities may seek to impose a municipal food and beverage tax only if the county in which the municipality is located has not levied or sought to levy such a tax within one year of the effective date of this bill.
    
    As written, the proposed bill does not affect State revenues as collections are directly remitted to the county or municipality where the funds originated. If all county governments are able to levy the maximum allowable tax, estimated aggregate revenues could be roughly $72 million per year, with the average county benefit being roughly $1.3 million per year. This analysis does not attempt to characterize potential revenue losses to border communities that may impose a lower tax on food and beverage purchases at restaurants.
    
    The amount of potential revenues will be highly variable, as there are caveats to the collection and use of the funds. For example, municipalities may only impose and collect the tax directly if the county has not sought to levy the tax. Municipalities are also limited to a tax of 2 percent, which would reduce earning potential in these areas. The bill also outlines provisions as to how revenues collected by counties may be spent. The bill requires at least 25 percent of revenues to be remitted to the county’s economic development authority for economic development purposes. Further, for revenues collected from restaurants within municipal borders, the bill requires at least 25 percent of revenues to be remitted to that municipality.
    
    There would be no additional costs incurred by the State Tax Department.
    
    



Memorandum


    The stated purpose of this bill is to allow local governments to levy a sales tax on food and beverages sold at restaurants. The bill provides for county and municipality options. The bill limits the total tax to three percent. The bill limits a municipal tax to two percent. The bill sets forth the procedures for counties and municipalities to use to impose the tax. The bill requires publication. The bill sets forth how the collected tax may be used. The bill sets forth apportionment of the tax between local jurisdictions. The bill sets forth exemptions from the tax. The bill defines terms. The bill provides criminal penalties.
    
    The proposed bill cannot be administered as it fails to conform to the Streamline Sales and Use Tax Agreement (SSUTA), of which West Virginia is a part, and article 15B of chapter 11 of the West Virginia Code. As written, the proposed bill does not make provisions for notice as required by the SSUTA. Further, the bill does not provide or refer to requirements of rate and boundary changes under W.Va. Code §11-15B-35.
    
    The proposed bill is silent as to how administration of a municipal tax should be administered, and does not address situations where a municipality already has a local sales and use tax or if a county implements a sales tax after municipalities within the county implement such a tax.
    



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