Sources of Revenue:

Other Fund State Road 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 senior citizens from the sales tax imposed on purchases of heating oil and propane. As written, this bill would exempt sales of propane and home heating oil from the 6 percent Consumers Sales and Service Tax in WV Code §11-15-9. However, propane and home heating oil are not subject to the 6 percent Consumers Sales Tax. These products are taxable under the Motor Fuel Excise Tax in §11-14C, which is comprised of both a flat rate (20.5 cents per gallon) and a variable rate (5 percent of the average wholesale price of fuel, calculated annually). Currently, all sales of propane are allowed a per se exemption from the flat rate component of the Motor Fuel Excise Tax. In addition, a refundable exemption from the flat rate component is allowed on all gallons of special fuel used for heating any public or private dwelling. There would be no revenue loss from the passage of this bill as written. If the intention is to provide a refundable exemption from the variable rate component of the Motor Fuel Excise Tax, the loss to the State Road Fund would be up to $600,000 per year. Additional administrative costs to the Tax Department for providing a refundable exemption from the variable rate component of the Motor Fuel Excise Tax for purchases of propane or home heating oil by persons over the age of sixty would be $40,800 during the current fiscal year and $21,400 per year thereafter.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2008 Increase/Decrease (use"-")	2009 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	40,800	21,400	21,400
Personal Services	20,800	20,800	20,800
Current Expenses	4,000	600	600
Repairs and Alterations	0	0	0
Assets	16,000	0	0
Other	0	0	0
2. Estimated Total Revenues	0	-600,000	-600,000

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

As written, this bill would exempt sales of propane and home heating oil from the 6 percent Consumers Sales and Service Tax in WV Code §11-15-9. However, propane and home heating oil are not subject to the 6 percent Consumers Sales Tax. These products are taxable under the Motor Fuel Excise Tax in §11-14C, which is comprised of both a flat rate (20.5 cents per gallon) and a variable rate (5 percent of the average wholesale price of fuel, calculated annually). Currently, all sales of propane are allowed a per se exemption from the flat rate component of the Motor Fuel Excise Tax. In addition, a refundable exemption from the flat rate component is allowed on all gallons of special fuel used for heating any public or private dwelling. There would be no revenue loss from the passage of this bill as written. If the intention is to provide a refundable exemption from the variable rate component of the Motor Fuel Excise Tax, the loss to the State Road Fund would be up to $600,000 per year. Individuals would have to apply for a refund of wholesale fuel sales tax paid. Additional administrative costs to the Tax Department for providing a refundable exemption from the variable rate component of the Motor Fuel Excise Tax for purchases of propane or home heating oil by persons over the age of sixty would be $40,800 during the current fiscal year and $21,400 per year thereafter.

Memorandum

The stated purpose of this bill is to exempt senior citizens from the sales tax imposed on purchases of heating oil and propane. As written, this bill would exempt sales of propane and home heating oil to persons over the age of sixty from the 6 percent Consumers Sales and Service Tax in WV Code §11-15-9. However, propane and home heating oil are not subject to the 6 percent Consumers Sales Tax. They are taxable under the Motor Fuel Excise Tax in §11-14C, which is comprised of both a flat rate (20.5 cents per gallon) and a variable rate (5 percent of the average wholesale price of fuel, calculated annually). Currently, all sales of propane are allowed a per se exemption from the flat rate component of the Motor Fuel Excise Tax. In addition, all gallons of special fuel used for heating any public or private dwelling is allowed a refundable exemption from the flat rate component. If the intention of the bill is to allow an exemption for propane and home heating fuel purchased by those aged sixty and over, the purchaser would be required to claim a refund of the tax. The Motor Fuel Tax is imposed and collected when the fuel is loaded into a delivery vehicle at the terminal. From that point on, the tax is embedded into the cost of the fuel and may not be backed-out of the cost to the purchaser. Also, there is nothing in the bill that restricts the exemption to propane gas that is used for home heating purposes. As a result, the bill may be broad in nature.

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