FISCAL NOTE
Date Requested: February 15, 2022
Time Requested: 09:51 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2229 |
Introduced |
SB635 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund, West Virginia Division of Tobacco Prevention
Sources of Revenue:
General Fund
Legislation creates:
Increases Revenue From Existing Sources, 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 amend the Tobacco Products Excise Tax Act; repeal discounts on tax stamps; add a definition of “Electronic smoking device”; increase taxes on tobacco products; provide that 10 percent of the revenue collected be dedicated to the West Virginia Division of Tobacco Prevention; and repeal §11-17-4a and §11-17-4b.
According to our interpretation, the bill amends and reenacts the Tobacco Products Excise Tax Act. A definition of “electronic smoking device” is added to the definitions section of the Act. The definition of “other tobacco product” or tobacco products other than cigarettes” is amended by deleting some language and replacing it with more descriptive language. The amended definition for “other tobacco product” or “tobacco products other than cigarettes” includes “electronic smoking devices and any component or accessory used in the consumption of a tobacco product, such as filters, rolling papers, pipes, and substances used in electronic smoking devices, whether or not they contain nicotine.”
Effective on and after July 1, 2022, the excise tax rate on cigarettes is increased to $2.70 on each 20 cigarettes or in like ratio on any part thereof, and the tax rate on tobacco products other than cigarettes is increased to 51 percent of the wholesale price of each article or item. The bill also directs that ten percent of the revenues collected from the excise tax on cigarettes and tobacco products other than cigarettes be dedicated to the West Virginia Division of Tobacco Prevention. The bill also eliminates the four percent discount allowed to wholesalers on stamps and other tobacco products and the prohibition against additional local tobacco taxes.
The proposed excise tax increases on cigarettes and other tobacco products would cause West Virginia tobacco excise tax rates to be significantly higher than most of our bordering states. More than 48 percent of the adult smoking population of West Virginia live in counties which border Virginia, Kentucky, and Ohio where the tax on a single pack of cigarettes would be at least $1.10 lower. Cigarettes and other tobacco products are portable and easy to smuggle. It is anticipated that West Virginia’s current net smuggling outflow of more than an estimated 8 percent, would change to a net inflow of more than 30 percent.
Per our interpretation, the increase in the Tobacco Excise Tax rates would increase total Tobacco Tax revenues by $100 million in FY2023, $108 million in FY2024, and by decreasing amounts in subsequent fiscal years. The bill provides that 10 percent of Tobacco Excise Tax collections, or roughly $26 million in FY2023, be dedicated to the Division of Tobacco Prevention. If the legislation is enacted, the net increase to the General Revenue Fund collections would be $74 million in FY2023, $82 million in FY2024, and by decreasing amounts in subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $85,000 in FY22, and $55,000 in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2022
Increase/Decrease
(use"-") |
2023
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
85,000 |
55,000 |
55,000 |
| Personal Services |
10,000 |
45,000 |
45,000 |
| Current Expenses |
25,000 |
10,000 |
10,000 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
50,000 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
100,000,000 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, the bill amends and reenacts the Tobacco Products Excise Tax Act. A definition of “electronic smoking device” is added to the definitions section of the Act. The definition of “other tobacco product” or tobacco products other than cigarettes” is amended by deleting some language and replacing it with more descriptive language. The amended definition for “other tobacco product” or “tobacco products other than cigarettes” includes “electronic smoking devices and any component or accessory used in the consumption of a tobacco product, such as filters, rolling papers, pipes, and substances used in electronic smoking devices, whether or not they contain nicotine.”
Effective on and after July 1, 2022, the excise tax rate on cigarettes is increased to $2.70 on each 20 cigarettes or in like ratio on any part thereof, and the tax rate on tobacco products other than cigarettes is increased to 51 percent of the wholesale price of each article or item. The bill also directs that ten percent of the revenues collected from the excise tax on cigarettes and tobacco products other than cigarettes be dedicated to the West Virginia Division of Tobacco Prevention. The bill also eliminates the four percent discount allowed to wholesalers on stamps and other tobacco products and the prohibition against additional local tobacco taxes.
The proposed excise tax increases on cigarettes and other tobacco products would cause West Virginia tobacco excise tax rates to be significantly higher than most of our bordering states. More than 48 percent of the adult smoking population of West Virginia live in counties which border Virginia, Kentucky, and Ohio where the tax on a single pack of cigarettes would be at least $1.10 lower. Cigarettes and other tobacco products are portable and easy to smuggle. It is anticipated that West Virginia’s current net smuggling outflow of more than an estimated 8 percent, would change to a net inflow of more than 30 percent.
Per our interpretation, the increase in the Tobacco Excise Tax rates would increase total Tobacco Tax revenues by $100 million in FY2023, $108 million in FY2024, and by decreasing amounts in subsequent fiscal years. The bill provides that 10 percent of Tobacco Excise Tax collections, or roughly $26 million in FY2023, be dedicated to the Division of Tobacco Prevention. If the legislation is enacted, the net increase to the General Revenue Fund collections would be $74 million in FY2023, $82 million in FY2024, and by decreasing amounts in subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $85,000 in FY22, and $55,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to amend the Tobacco Products Excise Tax Act; repeal discounts on tax stamps; add a definition of “Electronic smoking device”; increase taxes on tobacco products; provide that 10 percent of the revenue collected be dedicated to the West Virginia Division of Tobacco Prevention; and repeal §11-17-4a and §11-17-4b.
Effective on and after July 1, 2022, the tax rate on cigarettes is increased from $1.20 to $2.70 on each 30 cigarettes or in like ratio on any part thereof. Also effective on and after July 1, 2022, the tax rate on tobacco products other than cigarettes is increased from 12 percent to 51 percent of the wholesale price of each article or item. These rate changes are made by deleting the current rate and current internal effective date and replacing them with the new rate and date. A better method would be to use a proviso, which would retain the former rate for ease of historical reference.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov