Sources of Revenue:

Other Fund State Road 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 heating oil used for residential purposes from the Motor Fuel Excise Tax. As written, the passage of this bill would result in a loss to the State Road Fund of up to $5 million per year. This bill provides a per se exemption from both the flat rate and the variable rate component of the Motor Fuel Excise Tax on sales of heating fuel for use in private dwellings. Currently, all sales of special fuel used for heating any public or private dwelling are allowed a refundable exemption from the flat rate component of the Motor Fuel Tax under §11-14C-9(c)(9). The loss in revenue is attributable to the gasoline sales tax (i.e., variable rate) on heating fuel. However, the bill is very broad in scope since it does not define “private dwelling”. For instance, it is unclear whether fuel used to heat a commercial apartment dwelling would be exempt. Also, the term “heating fuel” is broader than the term “heating oil”, which is used in the West Virginia Code. Additional administrative costs to the State Tax Department would be $40,800 during the current fiscal year due to notifying taxpayers of the additional exemption and for additional personnel. Thereafter, additional administrative costs would be $21,400 per year.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2008 Increase/Decrease (use"-")	2009 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	40,800	21,400	21,400
Personal Services	20,800	20,800	20,800
Current Expenses	4,000	600	600
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	16,000	0	0
2. Estimated Total Revenues	0	-5,000,000	-5,000,000

Explanation of above estimates (including long-range effect):

As written, the passage of this bill would result in a loss to the State Road Fund of up to $5 million per year. This bill provides a per se exemption from both the flat rate and the variable rate component of the Motor Fuel Excise Tax on sales of heating fuel for use in private dwellings. Currently, all sales of special fuel used for heating any public or private dwelling are allowed a refundable exemption from the flat rate component of the Motor Fuel Tax under §11-14C-9(c)(9). The loss in revenue is attributable to the gasoline sales tax (i.e., variable rate) on heating fuel. However, the bill is very broad in scope since it does not define “private dwelling”. For instance, it is unclear whether fuel used to heat a commercial apartment dwelling would be exempt. Also, the term “heating fuel” is broader than the term “heating oil”, which is used in the West Virginia Code. Additional administrative costs to the State Tax Department would be $40,800 during the current fiscal year due to notifying taxpayers of the additional exemption and for additional personnel. Thereafter, additional administrative costs would be $21,400 per year.

Memorandum

The stated purpose of this bill is to exempt heating oil used for residential purposes from the Motor Fuel Excise Tax. This bill would exempt heating fuel from the Motor Fuel Excise Tax. The bill specifically excepts “heating fuel used exclusively for heating a private dwelling” from the definition of “Motor Fuel” in subsection (57) of §11-14C-2. Also, it inserts language into §11-14C-9(a)(5) providing a per se exemption from the flat rate component of the tax and §11-14C-9(b)(2) providing a per se exemption from the variable rate component of the tax. However, there is already an exemption from the flat rate component for special fuel used to heat dwellings (i.e., 11-14C-9(c)(9)). Also, this bill does not specifically define “heating fuel”, which is broader than the term “heating oil” currently used in the Code. Nor does it provide a definition of “private dwelling”. For instance, it is unclear whether fuel used to heat a commercial apartment dwelling would be exempt or not. The purchaser of the heating fuel would be required to claim a refund of the tax. The Motor Fuel Tax is imposed and collected when the fuel is loaded into a delivery vehicle at the terminal. From that point on, the tax is embedded into the cost of the fuel and may not be backed-out of the cost to the purchaser. Since this bill creates these exemptions as per se, which means that the tax is not imposed on the sale to the customer, it would be very difficult to administer.

Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us