FISCAL NOTE
Date Requested: February 13, 2018
Time Requested: 01:08 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2551 |
Introduced |
HB4543 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
Fight Substance Abuse Fund, Public Employees Insurance Agency Stability Fund
Sources of Revenue:
Other Fund Fight Substance Abuse Fund, Public Employees Insurance Agency Stability Fund
Legislation creates:
Creates New 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 impose an excise tax on Schedule II controlled drugs on drug manufacturers and distributors selling these drugs in the state. The tax would fund substance abuse treatment and help pay public employees’ insurance premiums.
According to our interpretation, the proposed bill would impose an excise tax of 5 cents per pill on Schedule II controlled drugs sold by or to pharmacies within the State. Revenues collected from this proposed tax would be split evenly between the Fight Substance Abuse Fund and the Public Employees Insurance Agency Stability Fund. Based on our understanding, the proposed bill could generate roughly $4.4 million per year for the first full year of implementation. Because there is no internal effective date, the provisions of the proposed bill would go into effect January 1, 2019, resulting in a partial-year collection of roughly $1.8 million in FY2019.
Costs incurred by the State Tax Department are expected to be $153,000 in FY2019 and $110,000 per year for each year thereafter.
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 |
153,000 |
110,000 |
| Personal Services |
0 |
100,000 |
100,000 |
| Current Expenses |
0 |
10,000 |
10,000 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
7,000 |
0 |
| Other |
0 |
35,000 |
0 |
| 2. Estimated Total Revenues |
0 |
1,800,000 |
4,400,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, the proposed bill would impose an excise tax of 5 cents per pill on Schedule II controlled drugs sold by or to pharmacies within the State. Revenues collected from this proposed tax would be split evenly between the Fight Substance Abuse Fund and the Public Employees Insurance Agency Stability Fund. Based on our understanding, the proposed bill could generate roughly $4.4 million per year for the first full year of implementation. Because there is no internal effective date, the provisions of the proposed bill would go into effect January 1, 2019, resulting in a partial-year collection of roughly $1.8 million in FY2019.
Costs incurred by the State Tax Department are expected to be $153,000 in FY2019 and $110,000 per year for each year thereafter.
Memorandum
The stated purpose of this bill is to impose an excise tax on Schedule II controlled drugs on drug manufacturers and distributors selling these drugs in the state. The tax would fund substance abuse treatment and help pay public employees’ insurance premiums.
As written, the proposed bill does not give the Tax Commissioner the authority necessary to administer, collect, and enforce the tax. The provisions of Article 10, Chapter 11, “Tax Procedure and Administration Act,” only apply when it is expressly provided by the Legislature. Both Article 9 and Article 10 of Chapter 11 of the West Virginia Code must be made expressly to apply to the new article for the Tax Commissioner to administer the proposed excise tax.
Although the intent of the proposed bill is that the pharmaceutical companies would pay the tax and the licensed in-state pharmacy would collect and remit the tax, in practice it is the pharmacy that is paying.
As there is no internal effective date, the provisions of the proposed bill will be in effect 90 days from passage with the excise tax applying to taxpayers for the taxable year beginning January 1, 2019. If legislative rules are submitted, these rules will not be effective until receiving legislative approval, which will likely be after January 1, 2019.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov