| Date Requested:February 07, 2007 Time Requested:02:58 PM |
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| FUND(S) General Revenue Fund and Lottery Funds | |||
|---|---|---|---|
Sources of Revenue | |||
| General Fund,Other Fund Lottery Funds | |||
Legislation creates:
Neither Program nor Fund | |||
Effect this measure will have on costs and revenues of state government.
| The stated purpose of this bill is to apply a consumer sales and service tax upon sales of wagers or plays by racetrack video lottery licenses to players of racetrack video lottery, while removing the exemption of the consumers sales and service tax for sales of wagers or plays by racetrack video lottery licensees to players of racetrack video lottery. The bill also provides an exemption from the consumer sales and service tax upon food and food products sold for human consumption off the premises where sold.
Since this bill does not provide specific definitions of “sales of wagers or plays”, we are unable to provide an accurate estimate of the revenue impact of an 18 percent sales tax on such “sales”. However, such a tax would most likely have a negative impact on the four racetracks. The payout on the racetrack video lottery machines is 92 percent (i.e., 92 cents on the dollar). An 18 percent sales tax would effectively lower the payout ratio for the wagerer (i.e., consumer). As a result, other forms of gambling/lottery would become more attractive to both residents of West Virginia and residents of surrounding states who come across the border to play racetrack video lottery. Also, there would be fewer video lottery funds available for distribution. Currently, video lottery terminal income is only 8 percent of the total wagered and is allocated as follows: 47% is paid to the racetrack, 36% is paid to state and local governments, and 17% is distributed to other non-governmental recipients (most of which is for racing purses). Currently, $11 million is taken each year from the share for racing purses for Workers Compensation debt reduction. This bill would also eliminate the Consumers Sales Tax on food sold for human consumption off the premises where sold beginning on July 1, 2007. The following table provides estimates of revenue loss to the General Revenue Fund. Fiscal Year 2010 represents the first full year effect of the elimination of the Consumers Sales Tax on food sold for home consumption. Sales of Food Meant for Home Consumption Only FY2008 -$102.1 million FY2009 -$77.1 million FY2010+ -$75.0 million Additional administrative costs to the State Tax Department would be approximately $104,000 in the current fiscal year due to ordering new coupon booklets and notifying taxpayers of the rate changes. Thereafter, there will be no additional administrative costs. However, the costs to the Racetracks would be significant due to reprogramming each video lottery machine to deduct the new sales tax from the wagers. Currently, there are a total of 11,400 machines at the four racetracks combined. |
| Over-all effect |
| Effect of Proposal | Fiscal Year | ||
|---|---|---|---|
| 2007 Increase/Decrease (use"-") |
2008 Increase/Decrease (use"-") |
Fiscal Year (Upon Full Implementation) | |
| 1. Estmated Total Cost | 0 | 0 | 0 |
| Personal Services | 0 | 0 | 0 |
| Current Expenses | 0 | 0 | 0 |
| Repairs and Alterations | 0 | 0 | 0 |
| Assets | 0 | 0 | 0 |
| Other | 0 | 0 | 0 |
| 2. Estimated Total Revenues | 0 | 0 | 0 |
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3. Explanation of above estimates (including long-range effect):
Since this bill does not provide specific definitions of “sales of wagers or plays”, we are unable to provide an accurate estimate of the revenue impact of an 18 percent sales tax on such “sales”. However, such a tax would most likely have a negative impact on the four racetracks. The payout on the racetrack video lottery machines is 92 percent (i.e., 92 cents on the dollar). An 18 percent sales tax would effectively lower the payout ratio for the wagerer (i.e., consumer). As a result, other forms of gambling/lottery would become more attractive to both residents of West Virginia and residents of surrounding states who come across the border to play racetrack video lottery.
Also, there would be fewer video lottery funds available for distribution. Currently, video lottery terminal income is only 8 percent of the total wagered and is allocated as follows: 47% is paid to the racetrack, 36% is paid to state and local governments, and 17% is distributed to other non-governmental recipients (most of which is for racing purses). Currently, $11 million is taken each year from the share for racing purses for Workers Compensation debt reduction. This bill would also eliminate the Consumers Sales Tax on food sold for human consumption off the premises where sold beginning on July 1, 2007. The following table provides estimates of revenue loss to the General Revenue Fund. Fiscal Year 2010 represents the first full year effect of the elimination of the Consumers Sales Tax on food sold for home consumption. Sales of Food Meant for Home Consumption Only FY2008 -$102.1 million FY2009 -$77.1 million FY2010+ -$75.0 million Additional administrative costs to the State Tax Department would be approximately $104,000 in the current fiscal year due to ordering new coupon booklets and notifying taxpayers of the rate changes. Thereafter, there will be no additional administrative costs. However, the costs to the Racetracks would be significant due to reprogramming each video lottery machine to deduct the new sales tax from the wagers. Currently, there are a total of 11,400 machines at the four racetracks combined. |
| The stated purpose of this bill is to apply a consumer sales and service tax upon sales of wagers or plays by racetrack video lottery licenses to players of racetrack video lottery, while removing the exemption of the consumers sales and service tax for sales of wagers or plays by racetrack video lottery licensees to players of racetrack video lottery. The bill also provides an exemption from the consumer sales and service tax upon food and food products sold for human consumption off the premises where sold.
As written, this bill would amend West Virginia Code §11-15-3(b) to impose a sales tax on sales of wagers or plays by racetrack video lottery licensees at a rate of 18 cents on the dollar. This violates section 308 of the Streamlined Sales and Use Tax Agreement, which provides that “no member state shall have multiple state sales and use tax rates on items of personal property and service....” There would also be unequal taxation problems because the tax would not apply to limited video lottery machines located at bars, fraternal lodges or veteran’s organizations. 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. Because the Streamlined Sales and Use Tax Agreement has a definition for “food”, the Legislature would be precluded from enacting this proposed exemption unless the language of the bill was amended to reflect that definition. |