Date Requested:February 24, 2005
Time Requested:01:52 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R521 Intro HB2644
CBD Subject: Food Tax Gradual Elimination
FUND(S)
General Revenue Fund
Sources of Revenue
General Fund
Legislation creates:
Neither Program nor Fund

Fiscal Note Summary

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

    The stated purpose of this bill is to reduce the consumer sales tax on food to: (1) Four cents on the dollar of sales as of July 1, 2005; (2) two cents on the dollar of sales as of July 1, 2006; and to eliminate the sales tax on food as of July 1, 2007.
    
    Although the stated purpose indicates a three-year phase-out, this bill as written would presumably eliminate the Consumers Sales Tax on food sold for human consumption off the premises where sold by a two-year phase-out. According to our interpretation, this bill would apply to food items sold at grocery stores. The following table provides estimates of revenue loss to the General Revenue Fund. Fiscal Year 2008 represents the first full year of removal of the Consumers Sales Tax on food sold at grocery stores.
    
     Sales of Food
    
     Meant for Home
    
     Consumption Only
    
    FY2006 -$46.4 million
    
    FY2007 -$143.6 million
    
    FY2008 -$152.0 million
    
    Additional administrative costs to the Tax Department would be approximately $24,000 during the current fiscal year and next fiscal year for notifying taxpayers, key encoding for new forms, and any associated programming costs. There would be no additional administrative costs thereafter.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2005
Increase/Decrease
(use"-")
2006
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 23,925 23,925 0
Personal Services 0 0 0
Current Expenses 23,925 23,925 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -46,400,000 -152,000,000
3. Explanation of above estimates (including long-range effect):
    Although the stated purpose indicates a three-year phase-out, this bill as written would presumably eliminate the Consumers Sales Tax on food sold for human consumption off the premises where sold by a two-year phase-out. According to our interpretation, this bill would apply to food items sold at grocery stores. The following table provides estimates of revenue loss to the General Revenue Fund. Fiscal Year 2008 represents the first full year of removal of the Consumers Sales Tax on food sold at grocery stores.
    
     Sales of Food
    
     Meant for Home
    
     Consumption Only
    
    FY2006 -$46.4 million
    
    FY2007 -$143.6 million
    
    FY2008 -$152.0 million
    
    Additional administrative costs to the Tax Department would be $23,925 during the current fiscal year and next fiscal year for notifying taxpayers, key encoding for new forms, and any associated programming costs. There would be no additional administrative costs thereafter.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    The stated purpose of this bill is to reduce the consumer sales tax on food to: (1) Four cents on the dollar of sales as of July 1, 2005; (2) two cents on the dollar of sales as of July 1, 2006; and to eliminate the sales tax on food as of July 1, 2007.
    
    The bill does not specifically define food or “food products,” nor does it provide guidance for the requirement that the food be sold for consumption off the premises where sold.
    
    Also, the bill sets two different tax rates on July 1, 2006, which would be administratively problematic for the Department. In §11-15-9i(a)(2), the bill states that “On or after the first day of July, two thousand six, and until the thirtieth day of June, two thousand seven is reduced to two cents on the dollar of sales.” The next section (§11-15-9i(b)), states that “On or after the first day of July, two thousand six, sales of food and food products sold for human consumption off the premises where sold are exempt from the tax imposed in this article.” As a result, the bill reflects both a 2 percent Sales Tax rate on food sold for home consumption on July 1, 2006 and a complete exemption from Sales Tax on food sold for home consumption on July 1,2006.