FISCAL NOTE
Date Requested: February 27, 2020
Time Requested: 02:13 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3293 |
Introduced |
SB832 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
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 permit retailers to assume or absorb any sales or use tax assessed on tangible personal property.
The overall effect is to convert the Consumers Sales Tax, which is now a trust tax, into a tax personal to the retailer by transferring legal incidence of tax to the vendor. This will lead to more difficult compliance problems in seeking payment of unpaid taxes. The bill provides that the vendor does not have to collect the sales tax from the purchaser of tangible personal property, custom software or taxable services, if the vendor otherwise assumes or absorbs payment of the tax. Under current law, retailers have the capacity to advertise that their sale price will cover the sales tax cost by offering a 6 percent discount on price with 6 percent sales tax added to the final sale.
Additional administrative costs cannot be estimated. Most retailers will likely still report and remit tax in the current manner.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2020
Increase/Decrease
(use"-") |
2021
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):
The overall effect is to convert the Consumers Sales Tax, which is now a trust tax, into a tax personal to the retailer by transferring legal incidence of tax to the vendor. This will lead to more difficult compliance problems in seeking payment of unpaid taxes. The bill provides that the vendor does not have to collect the sales tax from the purchaser of tangible personal property, custom software or taxable services, if the vendor otherwise assumes or absorbs payment of the tax. Under current law, retailers have the capacity to advertise that their sale price will cover the sales tax cost by offering a 6 percent discount on price with 6 percent sales tax added to the final sale.
Additional administrative costs cannot be estimated. Most retailers will likely still report and remit tax in the current manner.
Memorandum
The stated purpose of this bill is to permit retailers to assume or absorb any sales or use tax assessed on tangible personal property.
The overall effect of the bill is to convert what is now a trust tax into a personal vendor tax. This is problematic for several reasons. First of all, the criminal enforcement provisions of §11-9-5, failure to account for and pay over another’s tax, would no longer apply to the amounts of sales or use tax “assumed or absorbed” by a retailer. Instead, §11-9-4 would apply as those amounts would now be treated as a personal tax liability of the retailer. Although these sections are rarely invoked, the change is significant inasmuch as the penalties under §11-9-5 relating to trust taxes are far more severe than the penalties under §11-9-4 for failure to account for or pay over one’s own taxes.
Secondly, by making what was otherwise a trust tax into a tax of the retailer, the bill would make it more difficult to collect an outstanding tax liability in the event of insolvency or dissolution of a business since West Virginia would no longer have a priority lien against the liability. This may have serious ramifications. With no priority claim against the sales tax collected on its behalf but unremitted, West Virginia would become a mere unsecured creditor in the event of the vendor’s bankruptcy.
The effects of the bill go beyond just the state, however, as there are currently 47 municipalities (60, starting July 1, 2020) that also impose a sales tax. The state collects that tax on behalf of the municipalities, and so the municipalities also become mere unsecured creditors.
Another problem this bill would create relates to refundable exemptions under §11-15-9(b). If a purchaser pays tax that is effectively embedded in the purchase price of goods or services, the purchaser may not be able to claim an exemption which he or she is entitled to by law as no tax was “collected” by the vendor.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov