Date Requested:February 25, 2005
Time Requested:12:18 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R219 Intro SB351
CBD Subject: Commercial Laundries & Linen Services as
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 include the persons, firms and corporations defined as “commercial laundry” and “linen and garment rental services” conducting business in this state within the definition of manufacturing for consumer sales and use tax purposes. This bill will insure that “commercial laundry” and “linen and garment rental services” are treated, for consumer sales and use tax purposes, the same as other manufacturing activities.
    
    According to our interpretation, passage of this bill would result in some part of the equipment, materials and supplies purchased for the operation of “commercial laundry” and “linen and garment rental services” being exempt from Sales Tax as purchases for direct use or consumption in the manufacturing activity, even though the activity may not otherwise fall within the definition of manufacturing for any other purposes. Based on available data, passage of this bill would result in a reduction in General Revenue of roughly $500,000 per year.
    
    Additional administrative costs to the Tax Department associated with passage of this bill would be minimal.

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 4,000 0 0
Personal Services 0 0 0
Current Expenses 4,000 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -500,000 -500,000
3. Explanation of above estimates (including long-range effect):
    According to our interpretation, passage of this bill would result in some part of the equipment, materials and supplies purchased for the operation of “commercial laundry” and “linen and garment rental services” being exempt from sales tax as purchases for direct use or consumption in the manufacturing activity, even though the activity may not otherwise fall within the definition of manufacturing for any other purposes. Based on available data, passage of this bill would result in a reduction in General Revenue of roughly $500,000 per year.
    
    Additional administrative costs to the Tax Department would be due to printing and promotional expenses related to notifying taxpayers of the change.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    The stated purpose of this bill is to include the persons, firms and corporations defined as “commercial laundry” and “linen and garment rental services” conducting business in this state within the definition of manufacturing for consumer sales and use tax purposes. This bill will insure that “commercial laundry” and “linen and garment rental services” are treated, for consumer sales and use tax purposes, the same as other manufacturing activities.
    
    The bill amends the definition of “manufacturing” to include “commercial laundry” and “linen and garment rental services.” It appears that because the linen and laundry businesses repair the products that are rented to customers, the bill effectively makes that repair activity manufacturing. There is a distinction between repair and manufacturing. The result of that classification is that all equipment, materials and supplies purchased for that activity are exempt from the sales tax as purchases for direct use or consumption in the manufacturing activity. This is not available to other similarly situated businesses that rent equipment to commercial establishments.