FISCAL NOTE

Date Requested: March 03, 2021
Time Requested: 11:01 AM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2298 Introduced HB2866
CBD Subject: Municipalities


FUND(S):

Local funds

Sources of Revenue:

Other Fund Local Government Funds, Local Sales Tax and Excise Tax Administration Fund

Legislation creates:

Decreases Existing 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 remove the authority of municipalities participating in the Municipal Home Rule Program to impose a municipal sales tax. According to our interpretation, the bill would amend W.Va. Code §8-1-5a(i)(14) by removing the language that allows a municipality in the Municipal Home Rule Program to enact a sales tax of up to one percent if it reduces or eliminates its municipal business and occupation tax. The bill has no internal effective date. The bill is silent regarding municipalities which have already enacted a municipal sales and use tax under the Municipal Home Rule Program. However, Section §8-1-5a(b) states in part: “Any ordinance, act, resolution, rule, or regulation enacted by a participating municipality under the provisions of this section during the period of the Municipal Home Rule Pilot Program shall continue in full force and effect unless and until repealed: Provided, That municipalities that are participants in the Municipal Home Rule Program shall update their ordinances, acts, resolutions, rules, and regulations to comply with any additions or modifications to subsection (i) subsection (j) or subsection (k) of this section.” Since the amendment is being made to subsection (i), municipalities with a Municipal Home Rule Program authorized sales and use tax may no longer be permitted to collect the tax if the bill passes. Currently, thirty-nine municipalities are collecting municipal sales and use tax under the Municipal Home Rule Program. An additional, five municipalities are scheduled to begin collecting the tax on July 1, 2021. Per our interpretation, if this bill is passed and the municipalities which are currently approved to collect sales and use tax under the Municipal Home Rule Program are no longer authorized to collect the tax, there will be a loss in local governments collections of up to $75 million in FY2022 and more than $100 million in subsequent fiscal years. The loss may be reduced if the affected municipalities can increase or reinstitute a local business and occupation tax. In addition, there would be a reduction in fees allocated to the Local Sales Tax and Excise Tax Administration Fund of $1.65 million in FY2022 and $2.2 million in subsequent years. The provisions of this bill would not affect the imposition of local sales tax in the 19 current municipalities who are not participating under the Municipal Home Rule Program. Local sales tax collections in these municipalities total roughly $5.2 million per year. Any municipality not imposing a business and occupation tax is permitted to levy a local sales tax outside of the Home Rule Authority. Additional costs to the State Tax Department will be $15,000 in FY2021.  



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 15,000 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 15,000 0 0
2. Estimated Total Revenues 0 -75,000,000 -100,000,000


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


The bill is silent regarding municipalities which have already enacted a municipal sales and use tax under the Municipal Home Rule Program. However, Section §8-1-5a(b) states in part: “Any ordinance, act, resolution, rule, or regulation enacted by a participating municipality under the provisions of this section during the period of the Municipal Home Rule Pilot Program shall continue in full force and effect unless and until repealed: Provided, That municipalities that are participants in the Municipal Home Rule Program shall update their ordinances, acts, resolutions, rules, and regulations to comply with any additions or modifications to subsection (i) subsection (j) or subsection (k) of this section.” Since the amendment is being made to subsection (i), municipalities with a Municipal Home Rule Program authorized sales and use tax may no longer be permitted to collect the tax if the bill passes. Currently, thirty-nine municipalities are collecting municipal sales and use tax under the Municipal Home Rule Program. An additional, five municipalities are scheduled to begin collecting the tax on July 1, 2021. Per our interpretation, if this bill is passed and the municipalities which are currently approved to collect sales and use tax under the Municipal Home Rule Program are no longer authorized to collect the tax, there will be a loss in local governments collections of up to $75 million in FY2022 and more than $100 million in subsequent fiscal years. The loss may be reduced if the affected municipalities can increase or reinstitute a local business and occupation tax. In addition, there would be a reduction in fees allocated to the Local Sales Tax and Excise Tax Administration Fund of $1.65 million in FY2022 and $2.2 million in subsequent years. The provisions of this bill would not affect the imposition of local sales tax in the 19 current municipalities who are not participating under the Municipal Home Rule Program. Local sales tax collections in these municipalities total roughly $5.2 million per year. Any municipality not imposing a business and occupation tax is permitted to levy a local sales tax outside of the Home Rule Authority. Additional costs to the State Tax Department will be $15,000 in FY2021.



Memorandum


The stated purpose of this bill is to remove the authority of municipalities participating in the Municipal Home Rule Program to impose a municipal sales tax. The bill is insufficient to meet its purpose. The bill amends §8-1-5a(i)(14) by striking the proviso language that expressly allow municipalities to enact a sales tax of up to 1% if they reduce or eliminate their B&O tax. The result is that section 8-1-5a(i)(14) merely says that municipalities cannot enact any law that is contrary to law governing taxation. The bill is silent on whether municipalities that have enacted sales and use taxes under the Municipal Home Rule Program can continue imposing those taxes; or, if not, whether they can re-enact their B&O taxes to reclaim lost revenue. The bill does not address other sections of code which would be affected. Subsection (o) of the amended section addresses the Tax Department’s administration of the municipal sales tax, but subsection (o) is not amended. Other sections that may need to be amended include those cited in the stricken language, such as parts of Articles 15, 15A, and 15B, and the Streamlined Sales and Use Tax Agreement.



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