FISCAL NOTE

Date Requested: March 20, 2017
Time Requested: 02:43 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
3314 Introduced SB677
CBD Subject: Taxation


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 increase the tax rate on cigarettes and e-cigarettes liquid; and specifying an effective date. According to our interpretation, the proposed bill increases the cigarette tax to $1.70 per pack of 20, the tax on other tobacco products to 17 percent of the wholesale price, and the wholesale rate on e-cigarette liquids to $0.105 per milliliter effective July 1, 2017. Anticipated full-year revenue impacts are provided in the table below. Product Full Year Effect Cigarettes $46.3 million Other Tobacco Products $2.9 million E-Cigarette Fluid $0.4 million Total $49.6 million It is important to note that consumer behavior adjustments may occur due to the increase in Tobacco Product Tax rates (e.g., the purchase of tobacco products may increase in June 2017 prior to the rate increase). The potential increase in FY2017 Tobacco Products Tax collections is not quantified here. Longer-term consumption effects of the increased rates are considered in the estimates. Additional administrative costs incurred by the State Tax Department are expected to be $30,000 in FY2017 and $10,000 in FY2018.



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 30,000 10,000 0
Personal Services 0 10,000 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 30,000 0 0
2. Estimated Total Revenues 0 49,600,000 49,600,000


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


According to our interpretation, the proposed bill increases the cigarette tax to $1.70 per pack of 20, the tax on other tobacco products to 17 percent of the wholesale price, and the wholesale rate on e-cigarette liquids to $0.105 per milliliter effective July 1, 2017. Anticipated full-year revenue impacts are provided in the table below. Product Full Year Effect Cigarettes $46.3 million Other Tobacco Products $2.9 million E-Cigarette Fluid $0.4 million Total $49.6 million It is important to note that consumer behavior adjustments may occur due to the increase in Tobacco Product Tax rates (e.g., the purchase of tobacco products may increase in June 2017 prior to the rate increase). The potential increase in FY2017 Tobacco Products Tax collections is not quantified here. Longer-term consumption effects of the increased rates are considered in the estimates. Additional administrative costs incurred by the State Tax Department are expected to be $30,000 in FY2017 and $10,000 in FY2018.



Memorandum


The stated purpose of this bill is to increase the tax rate on cigarettes and e-cigarettes liquid; and specifying an effective date. The proposed bill has a title defect as it states the increase on cigarette and e-cigarette liquid taxes but does not also state that the bill raises the rate imposed on other tobacco products.



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