Date Requested:January 25, 2011
Time Requested:02:31 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R2216 Introduced SB247
CBD Subject: CONTRACTOR EXEMPTIONS
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 authorize an exemption from the consumer’s sales and service tax and use tax for qualified purchases of primary material handling equipment, racking and racking systems, and components thereof, building materials and tangible personal property installed into a new or expanded warehouse or distribution facility, which entails at least a $50 million investment and creates at least three hundred full-time equivalent West Virginia jobs.
    
    In addition to the information in the above stated purpose, the exemption created by this bill is limited to an expansion period. The expansion period is the period of time beginning one year prior to the start of construction or expansion of the qualified, new or expanded warehouse or distribution facility, and ending one year after the substantial completion of the construction or expansion of the facility. The expansion period cannot exceed five years. Also, the bill contains provisions to preclude the application of the new exemption to: a building or facility where tangible personal property is manufactured, fabricated, or assembled; or, a building or facility where annual calendar year retail sales of tangible personal property are made over-the-counter from such building or facility to the general public, if such sales exceed five percent of the total annual revenues of the warehouse or distribution facility during the same calendar year.
    
    The bill also proposes that the purchase of items qualifying for the new exemption by a person performing contracting for the new or expanded warehouse or distribution facility is not subject to any prohibition against the contractor asserting an exemption to which the purchaser of the contracting services is entitled.
    
    According to our interpretation, construction of a new or expanded facility is required. Therefore the tax foregone as a result of the new exemption arguably would not diminish revenue from current sources, but would come from a “new” source, comprised of “new” investment in a new or expanded facility.
    
    Passage of the bill will have little or no direct effect on current sales and use tax revenue. While there will be some sales and use tax foregone due to the exemption, the exemption would not reduce any tax derived from current sources. There will likely be other direct or indirect increases in tax revenue attributable to the new or expanded facility that will offset the sales and use tax foregone.
    
    Additional administrative costs to the State Tax Department associated with passage of this bill would be minimal.
    

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 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
3. Explanation of above estimates (including long-range effect):
    Passage of this bill would create an exemption from the consumers sales and service tax and use tax for qualified purchases of primary material handling equipment, racking and racking systems, and components thereof, building materials and tangible personal property installed into a new or expanded warehouse or distribution facility, which entails at least a $50 million investment and creates at least three hundred full-time equivalent West Virginia jobs.
    
    According to our interpretation, construction of a new or expanded facility is required. Therefore the tax foregone as a result of the new exemption arguably would not diminish revenue from current sources, but would come from a “new” source, comprised of “new” investment in a new or expanded facility.
    
    Passage of the bill will have little or no direct effect on current sales and use tax revenue. While there will be some sales and use tax foregone due to the exemption, the exemption would not reduce any tax derived from current sources. There will likely be other direct or indirect increases in tax revenue attributable to the new or expanded facility that will offset the sales and use tax foregone.
    
    Additional administrative costs to the State Tax Department associated with passage of this bill would be minimal.
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov