FISCAL NOTE

Date Requested: March 14, 2017
Time Requested: 01:22 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2985 Introduced HB3044
CBD Subject:


FUND(S):

Medical School Fund, General Revenue Fund

Sources of Revenue:

General Fund,Special 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 change the structure of the tax on bottled soft drinks and soft drink syrups and powders to only cover soft drinks with added caloric sweeteners, increase the rate to one cent per ounce and directing the excess proceeds into the State General Revenue Fund. The proposed bill would alter the current structure of the Soft Drinks Tax effective July 1, 2017 such that the tax imposed will be 1 cent per ounce of bottled soft drinks or prepared ounce derived from syrups or powders. The new tax would exclude beverages sweetened with noncaloric sweeteners. The first $15.0 million in funds collected from the new tax, net any administrative costs, will be deposited into the Medical School Fund with any remaining revenues deposited into the General Revenue Fund. As the bill does not define “noncaloric sweeteners,” we assume this would exclude artificially-sweetened beverages, such as diet sodas, from the tax. An alternate interpretation of this term could affect estimated revenues. According to our interpretation, the proposed 1 cent per ounce tax on bottled soft drinks is expected to result in a net revenue gain of roughly $74.3 million in FY2018. This estimate accounts for 11 months of collections following the change in tax reduced by anticipated FY2018 revenue collections from the current tax. A net revenue gain of approximately $78.6 million is expected in FY2019. Additional administrative costs incurred by the State Tax Department are expected to be $50,000 for the remainder of FY2017, $20,000 in FY2018, and $10,000 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 50,000 20,000 10,000
Personal Services 0 20,000 10,000
Current Expenses 5,000 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 45,000 0 0
2. Estimated Total Revenues 0 74,300,000 78,600,000


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


The proposed bill would alter the current structure of the Soft Drinks Tax effective July 1, 2017 such that the tax imposed will be 1 cent per ounce of bottled soft drinks or prepared ounce derived from syrups or powders. The new tax would exclude beverages sweetened with noncaloric sweeteners. The first $15.0 million in funds collected from the new tax, net any administrative costs, will be deposited into the Medical School Fund with any remaining revenues deposited into the General Revenue Fund. As the bill does not define “noncaloric sweeteners,” we assume this would exclude artificially-sweetened beverages, such as diet sodas, from the tax. An alternate interpretation of this term could affect estimated revenues. According to our interpretation, the proposed 1 cent per ounce tax on bottled soft drinks is expected to result in a net revenue gain of roughly $74.3 million in FY2018. This estimate accounts for 11 months of collections following the change in tax reduced by anticipated FY2018 revenue collections from the current tax. A net revenue gain of approximately $78.6 million is expected in FY2019. Additional administrative costs incurred by the State Tax Department are expected to be $50,000 for the remainder of FY2017, $20,000 in FY2018, and $10,000 for each year thereafter.



Memorandum


The stated purpose of this bill is to change the structure of the tax on bottled soft drinks and soft drink syrups and powders to only cover soft drinks with added caloric sweeteners, increase the rate to one cent per ounce and directing the excess proceeds into the State General Revenue Fund. The proposed bill does not define “noncaloric sweeteners,” which could introduce difficulty in administering the tax. The effective date may not provide sufficient time for the Tax Department to make necessary form changes and notify vendors of the increase.



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