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 exempt veterans’ organizations from the sales tax provisions.
    
    The passage of this bill could result in a loss to the General Revenue Fund of approximately $500,000 per year. As written, the bill is very broad in nature. There are no clear definitions of “veterans’ organizations” and no requirement that the organization selling goods or providing services be a nonprofit organization.
    
    Additional administrative costs to the Tax Department would be minimal. The only costs associated with this proposal would be notifying taxpayers of the exemption.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2005
Increase/Decrease
(use"-")
2006
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 4,000 0
Personal Services 0 0 0
Current Expenses 0 4,000 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -500,000 -500,000


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


    This proposal would exempt veterans’ organizations from the sales tax provisions and could result in a loss to the General Revenue Fund of approximately $500,000 per year, based on internal Tax Department data. As written, the bill is very broad in nature. There are no clear definitions of “veterans’ organizations” and no requirement that the organization selling goods or providing services be a nonprofit organization.
    
    Additional administrative costs to the Tax Department would be minimal (i.e., $4,000 per year). The only costs associated with this proposal would be notifying taxpayers of the exemption.



Memorandum


    The stated purpose of this bill is to exempt veterans’ organizations from the sales tax provisions. The bill amends WV Code §11-15-11 to include the following:
    
    (c) Sales of goods or services by a corporation or organization primarily organized and operated to promote, support or publicize military veterans’ causes, interests or affairs, or to otherwise conduct legitimate business activities on behalf and for the benefit of veterans, veterans’ organizations or veterans’ groups, are exempt from the tax imposed by this article.
    
    This bill is broad in scope. There is no requirement that the corporation or organization be nonprofit. Therefore, the exemption may apply to a for-profit corporation that competes with other corporations and organizations selling goods or services, putting them at a competitive disadvantage.
    
    There is no definition of “veterans’ organizations.” In order to qualify for the exemption, the corporation or organization must be primarily organized and operated to do certain activities. However, there is no guidance as to the meaning of “primarily.”
    



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