FISCAL NOTE
Date Requested: February 08, 2019
Time Requested: 11:25 AM |
| Agency: |
Alcohol Beverage Control Administration |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2755 |
Introduced |
HB2916 |
|
|---|
| CBD Subject: |
Alcoholic Liquors and Beers |
|---|
|
FUND(S):
General
Sources of Revenue:
Special Fund Hard Cider Excise Tax Fund
Legislation creates:
Creates New Fund: Hard Cider Excise Tax Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
Summarize in a clear and concise manner what impact this measure will have on costs and revenues of state government.
HB 2916 purports to create a new type of wine called "Hard Cider".
It is unclear if the bill meets its stated purpose of expanding the ability of hard cider manufacturers to produce hard cider in this state.
Wineries and farm wineries are licensed to manufacture wine with apple and pear cider or hard apple and pear cider as a subset of wine (what about peach cider?).
HB 2916 overlooks creating a statutory structure for hard cider or cideries; is unclear if it applies to hard cider made only in-state or all hard cider; does not clearly define hard cider as to what are fruits products? or fruit flavoring?; ignores the farm wineries must grow a certain percentage of raw product in the state; unclear what tax credit the bill is applying from the federal code to state code; created a special revenue fund and does not explain how funds are to be processed or utilized; and the tax rate would drop substantially for whatever is hard cider. Why not for mead, peach cider, red wine, white wine, shiraz, chianti and etc.? This proposed tax rate appears disparate and discriminatory.
Next HB 2916 purports to remove the food or meals requirements for a private wine restaurant. Webster's new world dictionary defines restaurant as “a place where meals can bought and eaten”. This seems counterintuitive. If you have private wine restaurant license by the very definition of the words, you should have meals, so removing the meal requirements makes no sense to continue to call the entity a private wine restaurant. The bill also changes the language for a private wine bed and breakfast and a private wine spa which is not disclosed in the bill’s note or enacting clauses.
Next HB 2916 further would permit (also not noted in the enacting clauses or the note) wine specialty shops licensed only to sell off-premises bottles of wine for consumption at home to potentially conduct tastings after hours with full glasses of wine. Sounds like a private wine restaurant license or on-premises consumption license without having to obtain such a license.
Next HB 2916 would permit wineries or farm wineries at a fair and festival to sell full glass of wine to patrons when the fair or festivals is at the winery or farm winery.
Lastly the bill purports to remedy a situation which is not an issue. A US citizen or a naturalized citizen may currently obtain a wine license or a corporation registered in WV where the officer, director or 20% or less shareholder of the corporation is a non-citizen then they can utilize a resident manager. This measure employees many WV residents and removing this could have a negative effect on WV employment at such licensed locations. Secondly, HB 2916 wholly removes the WV residency requirement. This issues was the subject of a recently settled litigation involving several wine distributors versus primarily one WV wine distributor in Wine and Beverage Merchants of WV, Inc.; Atomic Distributing Company; Beverage Distributors, Inc.; J.C. Distributing Company LLC; Phillip Jay Shifflett; Jo’s Globe Distributing Company; and Martin Distributing Company, v. Mountain State Beverage; Mountain Eagle, Inc.; Northern Eagle, Inc.; William J. Rucker, Jr.; Scott Parkes; and Johnson Brothers Liquor Company.
This does not appear to be a well thought out change as the residency and citizenship requirements have long standing measures to control responsible parties being in the alcohol industry that have distinct connections with the WV and the United States. The new language in he bill does not suffice.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2019
Increase/Decrease
(use"-") |
2020
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):
Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years.
Generally, the Tax Commissioner would have numbers on the amount collected by the wine liter tax. It is unclear whether the Tax Commissioner could break out information on cider sales. Without further information it would be too speculative to provide a number.
Generally, lowering the tax rate for class of wine would lower the taxes collected on the product. The proposed tax rate would tax rate proposed would change from 26.046 cents per liter would appear to be substantially lower and reflect disparate and discriminatory treatment of tax payers as noted above.
Making some "broad extrapolations" from the current wine liter tax collections of approximately $2,300,000 or roughly 2,298,190 gallons of wine sold. At the current rate (assuming cider is 20% of the current market) hard cider could generate $459,638, but with the hard cider tax rate in this bill the amount at the bill’s tax rate would be $101,396 for a loss of revenue of $358,242. To be clear, these are not actual numbers it would be too speculative with better data to calculate the actual amount of cider sold in WV.
HB 2916 as written is not well drafted and does very little to promote “hard cider” especially in WV. Further HB 2916 could decrease revenue to the state.
Memorandum
Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form.
Note some assumptions and extrapolations were made in the Fiscal Note explanation and actual numbers may vary.
HB 2916, as drafted, has substantial technical and logical flaws that would affect the ability to implement the changes.
Person submitting Fiscal Note: Anoop Bhasinon behalf of the WVABCA
Email Address: anoop.k.bhasin@wv.gov