Date Requested:March 16, 2005
Time Requested:11:37 AM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R1738 Intro HB3062
CBD Subject: Remove Sales Tax on Fresh Produce
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 exempt the sale of fresh produce from the sales tax.
    
    The passage of this bill could result in a loss of approximately $23 million to the General Revenue Fund. However, this estimate includes only fresh fruits and vegetables sold at grocery stores for home consumption (i.e., off the premises where sold). As written, this bill does not specifically define fresh produce or under what circumstances the exemption is to be applied. For example, many restaurants sell fresh fruits and vegetables as menu items. Such an exemption could be problematic for restaurants since many of these items are bundled with a meal (e.g., kids meals) or on salad bars, where there are other items available (e.g., soup, crackers, etc.).
    
    Additional administrative costs to the Tax Department would be $4,000 in FY2006 due to notifying taxpayers of the new exemption. 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 4,000 0
Personal Services 0 0 0
Current Expenses 0 4,000 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -23,000,000 -23,000,000
3. Explanation of above estimates (including long-range effect):
     The passage of this bill could result in a loss of approximately $23 million to the General Revenue Fund. However, this estimate includes only fresh fruits and vegetables sold at grocery stores for home consumption (i.e., off the premises where sold). As written, this bill does not specifically define fresh produce or under what circumstances the exemption is to be applied. For example, many restaurants sell fresh fruits and vegetables as menu items. Such an exemption could be problematic for restaurants since many of these items are bundled with a meal (e.g., kids meals) or on salad bars, where there are other items available (e.g., soup, crackers, etc.).
    
     Additional administrative costs to the Tax Department would be $4,000 in FY2006 due to notifying taxpayers of the new exemption. 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 exempt the sale of fresh produce from the sales tax.
    
    The passage of this bill would conflict with the Streamlined Sales and Use Tax Agreement (SSUTA) and West Virginia‚Äôs corresponding Act implementing that Agreement. There is no exemption in SSUTA for fresh fruit and vegetables or produce. The Legislature may exempt all food items, but may not exempt only certain items, such as fruit and vegetables without violating SSUTA. Such a violation would jeopardize West Virginia being in substantial compliance with SSUTA.