Senate Bill No. 478
(By Senators Rowe and McCabe)
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[Introduced February 7, 2003; referred to the Committee on Finance.]
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A BILL to amend article fifteen, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, by adding thereto a new section, designated section nine-h; to amend and reenact section thirteen, article sixteen of said chapter; to amend and reenact section three, article seventeen of said chapter; to amend and reenact section two, article nineteen of said chapter; to amend and reenact section seventeen, article three-a, chapter sixty of said code; and to amend and reenact section four, article eight of said chapter, all relating to enacting the "Tax Free Family Meal Act of 2003"; eliminating the sales tax on packaged food and fresh- grown food sold for human consumption off the premises where sold; making the elimination of grocery tax revenue neutral by increasing other taxes on certain products ; increasing the tax on beer to twelve percent of the wholesale price; establishing a container tax on containers of nonintoxicating beer; exempting the beer tax on beer consumed or sold at retail at the premises of a brewpub; increasing the excise tax on cigarettes sold by the pack to twenty-eight percent of the wholesale price; increasing the wholesale tax rate on other tobacco products to twenty-eight percent of the wholesale price; creating a wholesale tax on soft drinks tax for liquids, syrups and dry mixtures at the rate of ten percent of the wholesale prices; providing for a wholesale markup of liquor prices in order to produce the general revenue fund at least nineteen million, nine hundred fifty thousand dollars; setting the rate of the liter tax on wine at ten percent of the wholesale price; and providing for the tax commissioner to promulgate rules for the implementation of the articles of the act.

Be it enacted by the Legislature of West Virginia:
That article fifteen, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended by adding thereto a new section, designated section nine-h; that section thirteen, article sixteen of said chapter be amended and reenacted; that section three, article seventeen of said chapter be amended and reenacted; that section two, article nineteen of said chapter be amended and reenacted; that section seventeen, article three-a, chapter sixty of said code be amended and reenacted; and that section four, article eight of said chapter be amended and reenacted, all to read as follows:

ARTICLE 15. CONSUMERS SALES TAX.

§11-15-9h. Eliminating the sales tax on grocery foods; effective date.

(a) This section is titled "The Tax Free Family Meal Act of 2003."
(b) Notwithstanding any other provision of law to the contrary, the consumer sales tax on packaged and fresh grown food sold, for human consumption off the premises where sold, shall be reduced from six percent to zero percent effective the first day of November, two thousand three.
(c) As used in this section, the term "packaged food and fresh grown food sold for human consumption off the premises where sold" does not include food prepared in a kitchen or restaurant or on premises of the retail facility for carry out and immediate consumption by the purchaser or persons related to or associated with the purchaser.

ARTICLE 16. NONINTOXICATING BEER.

§11-16-13. Barrel and container tax on nonintoxicating beer.
(a) (1) Effective the first day of November, two thousand three, as part of the "Tax Free Family Meal Act of 2003," pursuant to section nine-h, article fifteen, chapter eleven of the code of West Virginia, there is hereby levied and imposed, in addition to the license taxes provided for in this article, a tax of five dollars and fifty cents at the rate of twelve percent of wholesale price on each barrel or other container of thirty-one gallons and in like ratio on each part barrel of nonintoxicating beer:
(A) Manufactured in this state for sale within this state, whether contained or sold in barrels, bottles or other containers; and a like tax is hereby levied and imposed upon
(B) All nonintoxicating beer manufactured outside of this state and brought into this state for sale within this state. but
(2) No nonintoxicating beer manufactured, sold or distributed in this state is subject to more than one barrel tax.
(3) The brewer manufacturing or producing nonintoxicating beer within this state for sale within this state shall pay the barrel tax on such the nonintoxicating beer and, except as provided otherwise, the distributor who is the original consignee of nonintoxicating beer manufactured or produced outside of this state, or who brings such the nonintoxicating beer into this state, shall pay the barrel tax on such the nonintoxicating beer manufactured or produced outside of this state. Provided, That
(4) The barrel or container tax imposed by this section shall does not apply to nonintoxicating beer manufactured by a brewpub for consumption on its premises or for retail sale by the brewpub at the premises of its manufacturing process.
(b) (1) On or before the tenth day of each month during the license period, every brewer or operator of a brewpub who manufactures or produces nonintoxicating beer within this state shall file a report in writing, under oath, to the tax commissioner, in the form prescribed by the tax commissioner, stating its total sales, or in the case of a brewpub, its total estimated production of nonintoxicating beer within this state during that month, and at the same time shall pay the tax levied by this article on such the production.
(2) On or before the tenth day of each month during the license period, every distributor who is the original consignee of nonintoxicating beer manufactured or produced outside this state or who brings such the beer into this state for sale shall file a report in writing, under oath, to the tax commissioner, in the form prescribed by the tax commissioner, stating its total estimated purchases of such nonintoxicating beer during that month, and at the same time shall pay the tax thereon levied by this article for such the estimated monthly purchase. Provided,

That
(3) The tax commissioner may allow, or require, a brewer who manufactures or produces nonintoxicating beer outside this state to file the required report and pay the required tax on behalf of its distributor or distributors. Any brewer or distributor or operator of a brewpub who files a report under this subsection may adjust its monthly estimated sales or purchases or production report or reports by filing amended reports by the twenty-fifth day of the reporting month.
(c) Every brewer or distributor or operator of a brewpub who files a report under subsection (b) of this section shall file a final monthly report of said the sales or purchases or production, in a form and at a time prescribed by the tax commissioner, stating actual nonintoxicating beer sales, purchases, or production and other information which the tax commissioner may require, and shall include a remittance for any barrel or container tax owed for actual sales or purchases or production made in excess of the amount estimated for that month.
(d) Any brewer or distributor or operator of a brewpub who files a report pursuant to subsection (b) of this section reflecting an underestimation of twenty-five percent or more of actual sales or purchases or production of nonintoxicating beer as shown by the report filed pursuant to subsection (c) of this section shall be assessed a penalty of one percent of the total taxes due in such the prior month.
(e) Brewers and distributors and operators of brewpubs shall keep all records which relate to the sale or purchase in this state of nonintoxicating beer for a period of three years unless written approval for earlier disposal is granted by the tax commissioner.
(f) Brewpubs shall keep such records as required by the federal government and may, in lieu of the recordkeeping and reporting requirements contained in subsections (a) through (e) of this section, file copies of the federal reports contemporaneously with the tax commissioner at the time of such the filings with the federal government. The filing of duplicate copies of the federal reports with the state tax commissioner shall be deemed as is considered compliance with subsections (a) through (e) of this section.
(g) Revenue collected from the beer tax levied and imposed by this section shall be deposited to the general revenue fund.

ARTICLE 17. TOBACCO PRODUCTS EXCISE TAX ACT.
§11-17-3. Levy of tobacco taxes; ratio; dedication of proceeds.
(a) Tax on cigarettes. -- Effective the first day of November, two thousand three, as part of "The Tax Free Family Meal Act of 2003," pursuant to section nine-h, article fifteen, chapter eleven of the code of West Virginia, For the purpose of providing to provide revenue for the general revenue fund of the state, an excise tax is hereby levied and imposed continued on sales of cigarettes, at the rate of seventeen cents twenty-eight percent of the wholesale price on each twenty cigarettes or in like ratio on any part thereof. Only one sale of the same article shall be used in computing the amount of tax due under this subsection.
(b) Tax on tobacco products other than cigarettes. -- Effective the first day of January November, two thousand two three, an excise tax is hereby levied and imposed on the sale or use of other than cigarettes tobacco products at a rate equal to seven twenty-eight percent of the wholesale price of each article or item of tobacco product other than cigarettes sold by the wholesaler or subjobber dealer, whether or not sold at wholesale, or if not sold, then at the same rate upon the use by the wholesaler or dealer. Only one sale of the same article shall be used in computing the amount of tax due under this subsection.
(c) Revenues received collected from this tax the taxes levied by this section shall be deposited into the general revenue fund.

§11-19-2. Excise tax on bottled soft drinks, syrups and dry mixtures; disposition thereof.

(a) For the purpose of providing revenue for the construction, maintenance and operation of a four-year school of medicine, dentistry and nursing of West Virginia University, an excise tax is hereby levied and imposed on and after midnight of the last day of June, one thousand nine hundred fifty-one, upon the sale, use, handling or distribution of all bottled soft drinks and all soft drink syrups, whether manufactured within or without this state, as follows:
(1) On each bottled soft drink, a tax of one cent on each sixteen and nine-tenths fluid ounces, or fraction thereof, or on each one-half liter, or fraction thereof contained therein.
(2) On each gallon of soft drink syrup, a tax of eighty cents, and in like ratio on each part gallon thereof, or on each four liters of soft drink syrup a tax of eighty-four cents, and in like ratio on each part four liters thereof.
(3) On each ounce by weight of dry mixture or fraction thereof used for making soft drinks, a tax of one cent or on each 28.35 grams, or fraction thereof, a tax of one cent.
Any person manufacturing or producing within this state any bottled soft drink or soft drink syrup for sale within this state and any distributor, wholesale dealer or retail dealer or any other person who is the original consignee of any bottled soft drink or soft drink syrup manufactured or produced outside this state, or who brings such these drinks or syrups into this state, shall be is liable for the excise tax hereby imposed. The excise tax hereby imposed shall may not be collected more than once in respect to any bottled soft drink or soft drink syrup manufactured, sold, used or distributed in this state, except as provided in subsection (b) of this section.
All revenue collected by the commissioner under the provisions of this article subsection (a) of this section, less such the costs of administration as are hereinafter provided for, shall be paid by him or her into a special medical school fund, which is hereby created in the state treasury, to be used solely for the construction, maintenance and operation of a four-year school of medicine, dentistry and nursing, as otherwise provided by law.
(b) (1) Effective the first day of November, two thousand three, as part of "The Tax Free Family Meal Act of 2003," pursuant to section nine-h, article fifteen, chapter eleven of the code of West Virginia, on each bottle or other container of soft drink sold as a liquid, syrup or dry mixture, there is levied and imposed a tax at the rate of ten percent of wholesale price.
(2) Any person manufacturing or producing within this state any bottled soft drink or soft drink syrup for sale within this state and any distributor, wholesale dealer or retail dealer or any other person who is the original consignee of any bottled soft drink or soft drink syrup manufactured or produced outside this state, or who brings these drinks or syrups into this state, is liable for the excise tax hereby imposed.
(3) Revenues from the taxes imposed by this subsection shall be deposited in the general revenue fund.

§60-3A-17. Wholesale prices set by commissioner; retail licensees to purchase liquor from state; transportation and storage; method of payment.
(a) The commissioner shall fix wholesale prices for the sale of liquor, other than wine, to retail licensees. The commissioner shall sell liquor, other than wine, to retail licensees according to a uniform pricing schedule. The commissioner shall obtain if possible, upon request, any liquor requested by a retail licensee.
(b) Effective the first day of November, two thousand three, as part of "The Tax Free Family Meal Act of 2003," pursuant to section nine-h, article fifteen, chapter eleven of the code of West Virginia, wholesale prices shall be established in order to yield a net profit for the general revenue fund of not less than six nineteen million five nine hundred fifty thousand dollars annually on an annual volume of business equal to the average for the past three years. The net revenue derived from the sale of alcoholic liquors shall be deposited into the general revenue fund in the manner provided in section seventeen, article three of this chapter.
(c) The commissioner shall specify the maximum wholesale markup percentage which may be applied to the prices paid by the commissioner for all liquor, other than wine, in order to determine the prices at which all liquor, other than wine, will be sold to retail licensees. A retail licensee shall purchase all liquor, other than wine, for resale in this state only from the commissioner, and the provisions of sections twelve and thirteen, article six of this chapter shall does not apply to the transportation of the liquor: Provided, That a retail licensee shall purchase wine from a wine distributor who is duly licensed under article eight of this chapter. All liquor, other than wine, purchased by retail licensees shall be stored in the state at the retail outlet or outlets operated by the retail licensee: Provided, however, That the commissioner, in his or her discretion, may upon written request permit a retail licensee to store liquor at a site other than the retail outlet or outlets.
(d) The sale of liquor by the commissioner to retail licensees shall be paid by electronic funds transfer which shall be initiated by the commissioner on the business day following the retail licensees order or by money order, certified check or cashier's check which shall be received by the commissioner at least twenty-four hours prior to the shipping of the alcoholic liquors: Provided, That if a retail licensee posts with the commissioner an irrevocable letter of credit or bond with surety acceptable to the commissioner from a financial institution acceptable to the commissioner guaranteeing payment of checks, then the commissioner may accept the retail licensee's checks in an amount up to the amount of the letter of credit.
(e) (1) A retail licensee may not sell liquor to persons licensed under the provisions of article seven of this chapter at less than one hundred ten percent of the retail licensee's cost as defined in section six, article eleven-a, chapter forty-seven of this code.
(2) A retail licensee may not sell liquor to the general public at less than one hundred ten percent of the retail licensee's cost as defined in section six, article eleven-a, chapter forty-seven of this code.

ARTICLE 8. SALE OF WINES.

§60-8-4. Wine liter tax.

Effective the first day of November, two thousand three, as part of "The Tax Free Family Meal Act of 2003," pursuant to section nine-h, article fifteen, chapter eleven of the code of West Virginia, there is hereby levied and imposed on all wine sold after the thirtieth day of April, one thousand nine hundred eighty-three, by suppliers to distributors, except wine sold to the commissioner, a tax of twenty-six and four hundred six-thousandths cents per liter ten percent of wholesale price.
Before the sixteenth day of each month, thereafter every supplier shall make a written report under oath to the tax commissioner showing the identity of the purchaser, the quantity, label and alcoholic content of wine sold by the supplier to West Virginia distributors during the preceding month, and at the same time shall pay the tax imposed by this article on the wine sold to the distributor during the preceding month.
The reports shall contain other information and be in the form the tax commissioner may require. For purposes of this article, the reports required by this section shall be considered are tax returns covered by the provisions of article ten, chapter eleven of this code.
No wine imported, sold or distributed in this state shall be is subject to more than one liter tax.

NOTE: The purpose of this bill is to

eliminating the sales tax on groceries.

The elimination of the tax would be revenue neutral by increasing other taxes on certain products, including beer, liquor, soft drinks, cigarettes and other tobacco products. The product taxes, other than the liquor wholesale markup amounts, would become taxes payable at rates stated as a percentage of wholesale price.

The current product taxes are set at per item prices in amounts levied in the 1960's and 1970's, except for the soft drink tax which was levied in 1951, and the tobacco product tax which was levied in 2002.

The grocery tax is a 6% sales tax which produces revenue currently in the amount of $138 million. This tax increases as the price of groceries increase.

The current tax amounts collected for these products appropriate the following sums: (1) Cigarettes - $32 million; (2) soft drinks - $12.8 million; (3) beer - $8.2 million; (4) liquor - $7.3 million; (5) other tobacco products - $4.8 million (estimated for first full year of the tax); and (6) wine liters - $1.2 million.

§11-15-9h is new section; therefore, strike-throughs and underscoring have been omitted.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.