Date Requested:July 28, 2011
Time Requested:12:25 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011X4001H Introduced HB101
CBD Subject: REDUCTION ON SALES TAX ON FOOD
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 reduce the Consumers Sales and Service Tax on food and food ingredients to 1.5%, beginning on January 1, 2012.
    
    As written, this bill would lower the Consumers Sales and Service Tax rate on food and food ingredients for home consumption. According to our interpretation, passage of this bill would establish the tax rate on food and food ingredients for home consumption at 1.5 percent, effective January 1, 2012. The 1.5 percent tax rate represents a reduction from the current tax rate of 3 percent and a reduction from the 2 percent tax rate that was previously enacted for implementation January 1, 2012 and included in the Governor's official revenue estimates for FY2012. The estimated revenue effects are shown below. Due to the mid-fiscal year effective date of the tax rate change and a one-month lag in tax collections, only a partial revenue impact will occur in FY2012 with FY2013 and subsequent years experiencing the full-year revenue reduction.
    
     Estimated
     3% to 1.5%
     Fiscal Year Revenue Impact
     2012 $16.5 million
     2013+ $39.0 million
    
     Budgeted
     3% to 2%
     Fiscal Year Revenue Impact
     2012 $11.0 million
     2013+ $26.0 million
    
     This Bill
     Net Impact
     Fiscal Year 2% to 1.5%
     2012 $ 5.5 million
     2013+ $13.0 million
    
    Additional administrative costs to the State Tax Department due to passage of this bill would be minimal. The State Tax Department had previously estimated that the tax rate reduction from 3 percent to 2 percent would increase administrative costs by roughly $74,000 in FY2012 due to notifying taxpayers of the rate change and for programming changes.
    

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 74,000 0
Personal Services 0 0 0
Current Expenses 0 48,000 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 26,000 0
2. Estimated Total Revenues 0 -5,500,000 -13,000,000
3. Explanation of above estimates (including long-range effect):
    The stated purpose of this bill is to reduce the Consumers Sales and Service Tax on food and food ingredients to 1.5%, beginning on January 1, 2012.
    
    As written, this bill would lower the Consumers Sales and Service Tax rate on food and food ingredients for home consumption. According to our interpretation, passage of this bill would establish the tax rate on food and food ingredients for home consumption at 1.5 percent, effective January 1, 2012. The 1.5 percent tax rate represents a reduction from the current tax rate of 3 percent and a reduction from the 2 percent tax rate that was previously enacted for implementation January 1, 2012 and included in the Governor's official revenue estimates for FY2012. The estimated revenue effects are shown below. Due to the mid-fiscal year effective date of the tax rate change and a one-month lag in tax collections, only a partial revenue impact will occur in FY2012 with FY2013 and subsequent years experiencing the full-year revenue reduction.
    
     Estimated
     3% to 1.5%
     Fiscal Year Revenue Impact
     2012 $16.5 million
     2013+ $39.0 million
    
     Budgeted
     3% to 2%
     Fiscal Year Revenue Impact
     2012 $11.0 million
     2013+ $26.0 million
    
     This Bill
     Net Impact
     Fiscal Year 2% to 1.5%
     2012 $ 5.5 million
     2013+ $13.0 million
    
    Additional administrative costs to the State Tax Department due to passage of this bill would be minimal. The State Tax Department had previously estimated that the tax rate reduction from 3 percent to 2 percent would increase administrative costs by roughly $74,000 in FY2012 due to notifying taxpayers of the rate change and for programming changes.
    


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