Date Requested:March 07, 2005
Time Requested:01:06 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R631 Intro SB465
CBD Subject: Food Tax Gradually Eliminated
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 establish the Food Tax Relief Act and to eliminate by a three-year phase-out the consumer sales tax on food and food products sold for human consumption off the premises where sold.
    
    As written, the passage of this bill would only reduce the Consumers Sales Tax rate on food sold for human consumption off the premises where sold in two years from 6 percent to 2 percent. 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 the rate reduction of the Consumers Sales Tax on food sold at grocery stores.
    
    Sales of Food Meant for Home Consumption Only
    
    FY2006 -$21.1 million
    
    FY2007 -$71.8 million
    
    FY2008 -$101.3 million
    
    Additional administrative costs to the Tax Department would be about $24,000 per year until the tax is reduced to 2 percent due to notifying taxpayers of the rate changes. Thereafter, there would be no additional administrative costs.

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 0 23,925 0
Personal Services 0 0 0
Current Expenses 0 23,925 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -21,100,000 -101,300,000
3. Explanation of above estimates (including long-range effect):
    As written, the passage of this bill would only reduce the Consumers Sales Tax rate on food sold for human consumption off the premises where sold in two years from 6 percent to 2 percent. 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 the rate reduction of the Consumers Sales Tax on food sold at grocery stores.
    
    Sales of Food Meant for Home Consumption Only
    
    FY2006 -$21.1 million
    
    FY2007 -$71.8 million
    
    FY2008 -$101.3 million
    
    Additional administrative costs to the Tax Department would be $23,925 per year until the tax is reduced to 2 percent due to notifying taxpayers of the rate changes. Thereafter, there would be no additional administrative costs.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    The stated purpose of this bill is to establish the Food Tax Relief Act and to eliminate by a three-year phase-out the consumer sales tax on food and food products sold for human consumption off the premises where sold.
    
    There is no mention of Food Tax Relief Act in the bill title or elsewhere within the bill.
    
    The Sales Tax on the affected food is not phased-out, it is phased-down to two percent over a two-year period. Also, 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.