FISCAL NOTE
Date Requested: February 13, 2017
Time Requested: 01:25 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1558 |
Introduced |
HB2351 |
|
|---|
| CBD Subject: |
|
|---|
|
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 provide for a sales tax of five percent for over the counter medicines and nutritional supplements. The bill provides that the tax be used to offset public employees insurance premiums.
Based on our interpretation, the proposed bill would effectively reduce the Consumer Sales and Services Tax on over-the-counter medicines and nutritional supplements to 5 percent and would dedicate revenues from this tax to public employees’ insurance premiums. At the current sales tax rate of 6 percent, the proposed bill would reduce General Revenue Fund collections by approximately $16.0 million in FY2018 and by $17.4 million for each year thereafter. Revenues dedicated to public employees insurance premiums at the proposed rate of 5 percent are anticipated to be approximately $13.3 million for FY2018 and $14.5 million for each year thereafter, resulting in a total net tax reduction of $2.7 million and $2.9 million, respectively.
Additional costs incurred by the State Tax Department would be $37,000 in FY2018 and $20,000 for each year thereafter.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2017
Increase/Decrease
(use"-") |
2018
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
37,000 |
20,000 |
| Personal Services |
0 |
20,000 |
20,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
17,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-16,000,000 |
-17,400,000 |
Explanation of above estimates (including long-range effect):
Based on our interpretation, the proposed bill would effectively reduce the Consumer Sales and Services Tax on over-the-counter medicines and nutritional supplements to 5 percent and would dedicate revenues from this tax to public employees’ insurance premiums. At the current sales tax rate of 6 percent, the proposed bill would reduce General Revenue Fund collections by approximately $16.0 million in FY2018 and by $17.4 million for each year thereafter. Revenues dedicated to public employees insurance premiums at the proposed rate of 5 percent are anticipated to be approximately $13.3 million for FY2018 and $14.5 million for each year thereafter, resulting in a total net tax reduction of $2.7 million and $2.9 million, respectively.
Additional costs incurred by the State Tax Department would be $37,000 in FY2018 and $20,000 for each year thereafter.
Memorandum
The stated purpose of this bill is to provide for a sales tax of five percent for over the counter medicines and nutritional supplements. The bill provides that the tax be used to offset public employees insurance premiums.
The proposed bill is silent as to how the public employees insurance premium costs would be offset. Further, the proposed bill may contain some title defects, such as not stating that the bill has an internal effective date and that the bill provides for the calculation of tax on fractional parts of a dollar.
As written, the proposed bill does not define the terms “nonprescription, over the counter medicines” and “nutritional supplements” and does not use terminology consistent with either West Virginia Code §11-15B, 110CSR15, or the Streamlined Sales and Use Tax Agreement, which West Virginia has adopted. To be consistent, terminology should be changed to “over-the-counter drugs” [see West Virginia Code §11-15B-2(b)(37)] and “dietary supplements” (see 110CSR15-2.33). Further, West Virginia Code §11-15B-2(b) would need to be amended to reflect the addition of “dietary supplements” as a taxable product.
The proposed bill does not state how this revenue is to be paid to PEIA. Without such guidance, administration of this change could cause difficulties and impose a burden on General Revenues. There will also be some difficulty in administering the tax given that only the sales tax on over-the-counter drugs and dietary supplements being redirected to offset PEIA costs.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov