FISCAL NOTE
Date Requested: February 06, 2019
Time Requested: 11:29 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2671 |
Introduced |
HB2861 |
|
|---|
| CBD Subject: |
Counties |
|---|
|
FUND(S):
Local governments
Sources of Revenue:
Other Fund local governments
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 allow counties to implement a 1% consumer sales tax in certain circumstances.
According to our interpretation, the proposed bill allows county governments to levy a sales tax of 1 percent. However, counties would not be able to collect this tax in municipalities that have enacted or are seeking to enact a sales tax.
As written, the proposed bill does not affect State revenues as collections are remitted to the counties where the funds originated. If all county governments levy the maximum allowable sales tax, estimated aggregate revenues would be roughly $144.2 million per year.
Additional administrative costs incurred by the State Tax Department would be $315,000 in FY2020 and each fiscal year thereafter.
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 |
315,000 |
315,000 |
| Personal Services |
0 |
180,000 |
180,000 |
| Current Expenses |
0 |
70,000 |
70,000 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
15,000 |
15,000 |
| Other |
0 |
50,000 |
50,000 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, the proposed bill allows county governments to levy a sales tax of 1 percent. However, counties would not be able to collect this tax in municipalities that have enacted or are seeking to enact a sales tax.
As written, the proposed bill does not affect State revenues as collections are remitted to the counties where the funds originated. If all county governments levy the maximum allowable sales tax, estimated aggregate revenues would be roughly $144.2 million per year.
Additional administrative costs incurred by the State Tax Department would be $315,000 in FY2020 and each fiscal year thereafter.
Memorandum
The stated purpose of this bill is to allow counties to implement a 1% consumer sales tax in certain circumstances.
The bill does not accomplish its stated purpose. The bill is unclear and has issues regarding the applicability of the proposed county sales tax to municipalities. The bill states that a county sales tax is not “applicable to” a municipality within a county that has previously enacted a sales tax, rather than stating a county sales tax is not applicable to the sales of goods or services in a municipality. Under this bill a county cannot impose a sales tax in a municipality that has enacted or seeking to enact a sales tax under the Municipal Home rule Pilot program. However, there are municipalities that have imposed a sales tax pursuant to the authority found under W. Va. Code §8-13C-4, and these municipalities would have both the county sales tax and the municipality sales tax. Additionally, it is not clear what is meant by “seeking to participate in the Municipal Home Pilot Program”
The bill also poses potential constitutional concerns. The bill only mentions a county sales tax but does not mention the imposition of a county use tax, to avoid constitutional concerns a use tax should also be applied. Additionally, article X of the West Virginia Constitution requires that taxation “be equal and uniform throughout the state…” Also, the proposed bill may arguably violate Section 10 of Article III of the West Virginia Constitution, which is the state’s equal protection clause. The state legislature “may make reasonable classifications in enacting statutes provided the classifications are based on some real and substantial relation to the objects sought to be accomplished by the legislation, and any person who assails any such classification has the burden of showing that it is essentially arbitrary and unreasonable.”
The bill also does not specifically provide a fee for administering the tax, like the Tax Commissioner receives for administering other local taxes.
The bill also fails to provide adequate notice to the Tax Department to administer the tax. The municipal sales and use taxes may become effective either on January 1 or July 1 after 180 days’ notice to the Tax Commissioner of the imposition of the taxes. This notice requirement is necessary because there are notice requirements for local rate changes. The bill does not make any provisions for notice requirements to conform to the Streamline Sales and Use Tax Agreement nor W. Va. Code §11-15B-1, et seq. For example, local tax rate changes shall be effective only on the first day of a calendar quarter after a minimum of sixty days' notice to the seller. Per the Agreement, local rate changes will be effective on the first day of a calendar quarter after a minimum of sixty days’ notice to sellers and 120 days’ notice for catalog sellers. This bill would allow counties to impose a county tax on or after July 1, 2019, without any reference or time for the notice requirements needed.
The bill also does not address how this new section applies in conjunction with W. Va. Code §7-27-1, et seq., the Let Our Counties Act Locally Act. Under that Article, counties are authorized to impose a sales and use tax, with a rate not to exceed one percent. This tax, if imposed, would be dedicated to funding local road projects. The Tax Commissioner is required to administer and collect that tax as well. It is unclear whether a county could potentially have a 2% sales and use tax if it uses both provisions (this new section and the county sales tax under W. Va. Code §7-27-1, et seq.), causing the sales tax in some areas to be 9%, including a state sales tax of 6%, a municipal sales tax of 1%, a county sales tax of 1%, and a Let Our Counties Act Locally county sales tax of 1%.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov