FISCAL NOTE



FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

A New Program



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The stated purpose of this bill is to create an annual exemption for clothing, footwear and school supplies. According to our interpretation, passage of this bill would create a three-day annual sales tax holiday and would reduce General Revenue Fund Tax collections by approximately $1.8 million per year. As written, the bill would apply to clothing items under $100, not just back-to-school clothing items under $100. Additionally, computers or computer accessories, where the cost after credit for any manufacturer’s rebate is less than $750, would be exempt. Additional administrative costs to the State Tax Department would be $48,500 during the current fiscal year due to notifying taxpayers and vendors of the annual holiday. Thereafter, there would be no additional costs.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2011
Increase/Decrease
(use"-")
2012
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 48,500 0 0
Personal Services 0 0 0
Current Expenses 48,500 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 -1,800,000


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


The stated purpose of this bill is to create an annual exemption for clothing, footwear and school supplies. According to our interpretation, passage of this bill would create a three-day annual sales tax holiday and would reduce General Revenue Fund Tax collections by approximately $1.8 million per year. As written, the bill would apply to clothing items under $100, not just back-to-school clothing items under $100. Additionally, computers or computer accessories, where the cost after credit for any manufacturer’s rebate is less than $750, would be exempt. Additional administrative costs to the State Tax Department would be $48,500 during the current fiscal year due to notifying taxpayers and vendors of the annual holiday. Thereafter, there would be no additional costs.



Memorandum


The stated purpose of this bill is to create an annual exemption for clothing, footwear and school supplies. This bill may be in violation of the Streamlined Sales and Use Tax Agreement (SSUTA). Under the Agreement, items exempted must be defined in Part II or Part III(B) of the Library of Definitions. Footwear is not defined in either of these two parts. Also, SSUTA requires that sales tax holidays be preceded by notice of at least 60 days in advance of the holiday. Since there is no effective date in the bill, the notice time line may be difficult fulfill by the first weekend in August 2011.



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