Date Requested:January 20, 2011
Time Requested:03:34 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R1689 Introduced HB2658
CBD Subject: WHOLESALE TAX REDUCTION ON HOME HEATING FUEL
FUND(S)
State Road Fund
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 reduce the wholesale tax on heating fuel, off-road fuels, kerosene and propane used for home heating purposes or off road use to 4.85% effective January 1, 2011.
    
    As written, this bill proposes to reduce the wholesale tax on fuel consumed for off-road usage. Under current law, the Motor Fuel Excise Tax is composed of a flat rate (i.e., 20.5 cents per gallon) and a variable rate component. The variable rate component is equal to 5 percent of the average wholesale price of fuel. As of January 1, 2011, the variable rate was set at 11.7 cents per gallon (i.e., .05 x $2.34 per gallon). If the intent of the bill is to reduce the variable rate component to 4.85 percent of the average wholesale price of fuel (i.e., .0485 x $2.34 = 11.35 cents per gallon), the loss to the State Road Fund would be roughly $1.3 million during the first full year of effect and thereafter (assuming the average wholesale price remains unchanged).
    
    Additional administrative costs to the Tax Department would be $26,400 during the current fiscal year for programming changes. Thereafter, there would be no additional costs.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2011
Increase/Decrease
(use"-")
2012
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 26,400 0 0
Personal Services 0 0 0
Current Expenses 800 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 25,600 0 0
2. Estimated Total Revenues -530,000 -1,300,000 -1,300,000
3. Explanation of above estimates (including long-range effect):
    The stated purpose of this bill is to reduce the wholesale tax on heating fuel, off-road fuels, kerosene and propane used for home heating purposes or off road use to 4.85% effective January 1, 2011.
    
    As written, this bill proposes to reduce the wholesale tax on fuel consumed for off-road usage. Under current law, the Motor Fuel Excise Tax is composed of a flat rate (i.e., 20.5 cents per gallon) and a variable rate component. The variable rate component is equal to 5 percent of the average wholesale price of fuel. As of January 1, 2011, the variable rate was set at 11.7 cents per gallon (i.e., .05 x $2.34 per gallon). If the intent of the bill is to reduce the variable rate component to 4.85 percent of the average wholesale price of fuel (i.e., .0485 x $2.34 = 11.35 cents per gallon), the loss to the State Road Fund would be roughly $1.3 million during the first full year of effect and thereafter (assuming the average wholesale price remains unchanged).
    
    Additional administrative costs to the Tax Department would be $26,400 during the current fiscal year for programming changes. Thereafter, there would be no additional costs.
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov
    The stated purpose of this bill is to reduce the wholesale tax on heating fuel, off-road fuels, kerosene and propane used for home heating purposes or off road use to 4.85% effective January 1, 2011.
    
    As written, it is unclear how the wholesale tax rate in this bill is to be reduced. The bill proposes to change the wholesale tax rate on heating fuel, off road fuels, kerosene and propane used for home heating purposes or for off road use to 4.85 percent, but it does not state percent of “what”. It is unclear whether or not the current variable rate component of the Motor Fuel Excise Tax is to be reduced to 4.85 percent of the wholesale price of fuel or if something else is intended.
    
    Also, the bill would be retroactive to January 1, 2011, since that is the effective date for the rate change.