FISCAL NOTE

Date Requested: February 16, 2021
Time Requested: 03:51 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2732 Introduced SB299
CBD Subject: Governor -- Bills Requested By


FUND(S):

General Revenue Fund, Agriculture Development Fund

Sources of Revenue:

General Fund Agriculture Development Fund

Legislation creates:

Creates New Revenue, Decreases Existing Revenue, Increases Existing Expenses, Creates New Fund: Agriculture Development Fund



Fiscal Note Summary


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


The stated purpose of this bill is to provide liquor, wine, and beer licensees with some new concepts developed during the State of Emergency utilizing new technology to provide greater freedom to operate in a safe and responsible manner, and additionally to provide new licenses to reflect societal requests, by creating: (1) the ability to sell sealed liquor drinks in a craft cocktail, sealed wine, and sealed beer by a Class A licensee or a third party, who obtains a third party delivery license, with a food order utilizing telephone, mobile ordering app, or web based software; (2) a nonintoxicating beer or nonintoxicating beer retail transportation permit, a private wine delivery permit, and craft cocktail delivery permit to transport a food order and beer, wine, and liquor in a vehicle to a purchasing patron; (3) outdoor dining and outdoor street dining areas when authorized by a municipality for beer, wine, and liquor; (4) authorizing in-person or in-vehicle delivery while picking up food and sealed nonintoxicating beer, nonintoxicating craft beer, wine, or craft cocktail growler orders-to-go; (5) an unlicensed brewer or home brewer temporary license to attend a limited number of fairs and festivals in West Virginia and provide nonintoxicating beer to patrons; (6) permitting distilleries, mini-distilleries, micro-distilleries, wineries, and farm wineries to operate a private manufacturer club on their licensed premises which can include outdoor spaces; (7) permitting owners of distilleries, mini-distilleries, and micro-distilleries to operate wineries farm wineries, brewers, and resident brewers, and vice versa for wineries and farm wineries; (8) authorizing the direct shipping of liquor to adult West Virginia residents by distilleries, requirements, and license fee; (9) expanded definitions and requirements for pre-mixing alcoholic drinks not in the original container with public health and safety issues addressed; (10) a new license for a private caterer which is already licensed as a private club restaurant to caterer food and alcohol to unlicensed venues with limits; (11) a new license for a private club bar which only provides pre-packaged or basic food in a limited kitchen; (12) a new license for a private club restaurant which provides freshly prepared food in a restaurant style kitchen; (13) a new license for a private tennis club bar where the facility has tennis courts and other grounds which could encompass the licensed premises; (14) a new license for a private wedding venue or barn where food and alcohol are provided on limited basis and the licensee does not operate with daily bar hours; (15) a new license for a limited one-time, once a year license for a charity to conduct a liquor auction in conjunction with a private club and this is limited since the parties are not licensed for liquor sales like a retail liquor outlet; (16) a new license for a multi-vendor fair and festival license where multiple vendors may share liability and responsibility when conducting a joint alcohol event authorized by a municipality; (17) facilitating the economic development of hard cider in West Virginia by reclassifying hard cider in code, establishing a hard cider tax rate; tax collection; creating a new fund for the Agriculture Department to facilitate fruit production for use in hard cider, and additional hard cider requirements; (18) authorizing the ability to sell sealed wine growlers from wineries, farm wineries, and various wine retailers; and (19) and an exemption from the unlawful admission dance hall prohibition for certain licensees utilizing an age verification system. Further, the bill provides for various requirements, licensee fees in certain situations and no additional license fees in certain situations, and penalties. This bill would create a new tax, imposed on all hard cider sold by wineries, farm wineries and suppliers to distributors, and including all hard cider sold and sent to direct shippers, at a rate of 22.6 cents per gallon. This bill would create a new Special Revenue Fund account known as the Agriculture Development Fund. The Tax Commissioner would deposit collections from the hard cider tax into this fund on at least a quarterly basis. Currently, hard cider is subject to the Wine Liter Tax of $1.00 per gallon. This bill would exempt hard cider from the Wine Liter Tax and would instead tax this product separately at a rate of 22.6 cents per gallon. The effective date of this bill would be July 1, 2021. This bill would also allow for producers of hard cider to claim a credit against the Hard Cider Tax of “5.6 cents per wine gallon on the first 100,000 wine gallons of hard cider which are removed during such year for consumption or sale and which have been produced at qualified facilities in the United States. That credit shall be reduced by one percent for each 1,000 wine gallons of hard cider produced in excess of 150,000 wine gallons of hard cider during the calendar year.” According to the most recent West Virginia Wine Liter Tax return data, the hard cider exemption from the Wine Liter Tax would reduce General Revenue Fund collections by approximately $150,000 in FY2022. The new tax on hard cider would generate $34,000 per year for the new Agriculture Development Special Revenue Fund less any amount of credit for production of qualified facilities. The estimated loss of revenue to the Agriculture Development Special Revenue Fund due to this tax credit would initially be up to $2,000. Portions of this bill which address the regulation of licensure of establishments that sell wine, beer, and hard cider may be referred to the West Virginia Alcohol Beverage Control Administration. Administrative costs incurred by the State Tax Department in FY2022 would be $120,000 to implement a minimum of 12 schedule or return changes that would be required, along with additional testing for each, and $1,000 for office machines. An additional $45,000 in ongoing costs would be required for additional personnel due to the influx of tax data being received.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2021
Increase/Decrease
(use"-")
2022
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 166,000 45,000
Personal Services 0 45,000 45,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 1,000 0
Other 0 120,000 0
2. Estimated Total Revenues 0 0 0


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


This bill would create a new tax, imposed on all hard cider sold by wineries, farm wineries and suppliers to distributors, and including all hard cider sold and sent to direct shippers, at a rate of 22.6 cents per gallon. This bill would create a new Special Revenue Fund account known as the Agriculture Development Fund. The Tax Commissioner would deposit collections from the hard cider tax into this fund on at least a quarterly basis. Currently, hard cider is subject to the Wine Liter Tax of $1.00 per gallon. This bill would exempt hard cider from the Wine Liter Tax and would instead tax this product separately at a rate of 22.6 cents per gallon. The effective date of this bill would be July 1, 2021. This bill would also allow for producers of hard cider to claim a credit against the Hard Cider Tax of “5.6 cents per wine gallon on the first 100,000 wine gallons of hard cider which are removed during such year for consumption or sale and which have been produced at qualified facilities in the United States. That credit shall be reduced by one percent for each 1,000 wine gallons of hard cider produced in excess of 150,000 wine gallons of hard cider during the calendar year.” According to the most recent West Virginia Wine Liter Tax return data, the hard cider exemption from the Wine Liter Tax would reduce General Revenue Fund collections by approximately $150,000 in FY2022. The new tax on hard cider would generate $34,000 per year for the new Agriculture Development Special Revenue Fund less any amount of credit for production of qualified facilities. The estimated loss of revenue to the Agriculture Development Special Revenue Fund due to this tax credit would initially be up to $2,000. Portions of this bill which address the regulation of licensure of establishments that sell wine, beer, and hard cider may be referred to the West Virginia Alcohol Beverage Control Administration. Administrative costs incurred by the State Tax Department in FY2022 would be $120,000 to implement a minimum of 12 schedule or return changes that would be required, along with additional testing for each, and $1,000 for office machines. An additional $45,000 in ongoing costs would be required for additional personnel due to the influx of tax data being received.



Memorandum


The stated purpose of this bill is to provide liquor, wine, and beer licensees with some new concepts developed during the State of Emergency utilizing new technology to provide greater freedom to operate in a safe and responsible manner, and additionally to provide new licenses to reflect societal requests, by creating: (1) the ability to sell sealed liquor drinks in a craft cocktail, sealed wine, and sealed beer by a Class A licensee or a third party, who obtains a third party delivery license, with a food order utilizing telephone, mobile ordering app, or web based software; (2) a nonintoxicating beer or nonintoxicating beer retail transportation permit, a private wine delivery permit, and craft cocktail delivery permit to transport a food order and beer, wine, and liquor in a vehicle to a purchasing patron; (3) outdoor dining and outdoor street dining areas when authorized by a municipality for beer, wine, and liquor; (4) authorizing in-person or in-vehicle delivery while picking up food and sealed nonintoxicating beer, nonintoxicating craft beer, wine, or craft cocktail growler orders-to-go; (5) an unlicensed brewer or home brewer temporary license to attend a limited number of fairs and festivals in West Virginia and provide nonintoxicating beer to patrons; (6) permitting distilleries, mini-distilleries, micro-distilleries, wineries, and farm wineries to operate a private manufacturer club on their licensed premises which can include outdoor spaces; (7) permitting owners of distilleries, mini-distilleries, and micro-distilleries to operate wineries farm wineries, brewers, and resident brewers, and vice versa for wineries and farm wineries; (8) authorizing the direct shipping of liquor to adult West Virginia residents by distilleries, requirements, and license fee; (9) expanded definitions and requirements for pre-mixing alcoholic drinks not in the original container with public health and safety issues addressed; (10) a new license for a private caterer which is already licensed as a private club restaurant to caterer food and alcohol to unlicensed venues with limits; (11) a new license for a private club bar which only provides pre-packaged or basic food in a limited kitchen; (12) a new license for a private club restaurant which provides freshly prepared food in a restaurant style kitchen; (13) a new license for a private tennis club bar where the facility has tennis courts and other grounds which could encompass the licensed premises; (14) a new license for a private wedding venue or barn where food and alcohol are provided on limited basis and the licensee does not operate with daily bar hours; (15) a new license for a limited one-time, once a year license for a charity to conduct a liquor auction in conjunction with a private club and this is limited since the parties are not licensed for liquor sales like a retail liquor outlet; (16) a new license for a multi-vendor fair and festival license where multiple vendors may share liability and responsibility when conducting a joint alcohol event authorized by a municipality; (17) facilitating the economic development of hard cider in West Virginia by reclassifying hard cider in code, establishing a hard cider tax rate; tax collection; creating a new fund for the Agriculture Department to facilitate fruit production for use in hard cider, and additional hard cider requirements; (18) authorizing the ability to sell sealed wine growlers from wineries, farm wineries, and various wine retailers; and (19) and an exemption from the unlawful admission dance hall prohibition for certain licensees utilizing an age verification system. Further, the bill provides for various requirements, licensee fees in certain situations and no additional license fees in certain situations, and penalties. There are concerns with this bill. The bill adds several new licenses. Any time a new license type is added by the ABCA, there are questions about how that licensee is to be taxed. For example, it is unclear if the newly added private shipper license for distilleries is considered a retail licensee under W. Va. Code §60-3A-1, et seq., such that the 5% wine and liquor tax applies to these transactions. See, W.Va. Code §60-3A-21. There are also several temporary licenses granted, which may make it difficult for the Tax Department to monitor and enforce the payment of taxes. The bill note indicates that the bill is to provide licensees with new concepts during the State of Emergency, but there is no indication that these changes are only for the duration of the State of Emergency. Given the amount of substance in this bill, one might argue that there is more than one subject in the same bill contrary to W. Va. Constitution Article VI section 30.



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